ECONOMIC OVERVIEW
RESILIENCE RESULTING IN RESURGENCE
Since January 2024, the global economic outlook has improved. The world economy is now projected to grow by 2.7% in 2024 (against 2.4% forecasted earlier) on the back of the better-than-expected performance of the United States and some improvement in the outlook for several large emerging economies.
The modest gain in the growth momentum is partly offset by the downward revisions of the growth outlook for the European Union, Africa, and Western Asia. The near-term economic outlook is only cautiously optimistic as economic vulnerabilities remain amid high interest rates, continuing geopolitical tensions, and increasing climate risks.
Despite global economic challenges, India maintained its status as the fastest-growing large economy in the world in FY24. Indias economy showed impressive growth in the last quarter of FY24, with a real GDP growth rate of 7.8% year-over-year (YoY). This robust performance resulted in an overall GDP growth of 8.2% for the entire fiscal year, up from 7% in FY23, marking the third consecutive year of growth exceeding 7%.
According to the National Statistical Office (NSO), private final consumption expenditure (PFCE), which depicts the consumption demand in the country, grew by 4% in 2023-24. Government final consumption expenditure (GFCE) growth moderated to 2.5%. Gross fixed capital formation (GFCF), an indicator of investment demand in the country, grew by a robust 9%.
High-frequency indicators suggest that the economic growth momentum will continue into the current fiscal year, with a normal monsoon expected to boost rural demand recovery. This, combined with steady urban demand, should enhance overall private consumption. Investment activities are also anticipated to strengthen further, supported by robust government capital expenditure and healthy balance sheets in the corporate and banking sectors, fostering a favourable environment for private capital expenditure revival. With the incumbent Government making a comeback in the recently concluded General Elections, the progressive policies and schemes should continue with more aggression.
Despite global economic challenges, India maintained its status as the fastest-growing large economy in the world in FY24.
THE TILE INDUSTRY
FLOORING MILLIONS WITH ITS APPEAL
The domestic tile industry witnessed significant evolution and growth, propelled by a burgeoning construction and real estate sector. Initially characterised by traditional handcrafted tiles, the industry has undergone a transformative shift towards technologically advanced and aesthetically appealing tiles.
Rapid urbanisation, increasing disposable income, and changing consumer preferences have driven the demand for innovative tile designs and large-format tiles, prompting manufacturers to be much more innovative than ever before. Appreciable growth of Indias residential and commercial real estate sector, significant investment in renovation, and Government initiatives promoting affordable housing and infrastructure development have further stimulated the addressable tile market.
The domestic tile industry could be divided into branded and non-branded players. The non-branded players dominate the Indian tile industry and are largely concentrated in Morbi, Gujarat, recognised as Indias tile hub.
The branded players are the cream of the Indian tile industry who have given it a global standing owing to its unwavering thirst for innovation, its steadfast pursuit of technology and its capability of transforming tiles from a commodity into a showcase product that stands out as a style statement and standing in society. Their share in the tile industry is growing as compared to unbranded counterpart.
Over the past decade, Indias tile industry has come to global attention due to the meteoric growth of its export activity, which has increased steadily across all continents. Interestingly, this export growth is spearheaded not so much by the well-established Indian brands but by the dense network of companies in the Morbi cluster in Gujarat.
In FY13, India exported just about 55 million square metres of tiles and was the ninth-largest exporter globally. This figure had soared to 590 million sqm in FY24, positioning India as the second largest exporter worldwide.
Continuing policies and economic progress augur well for improved consumer consumption. Stable interest rates and commodity prices should provide impetus to construction activities, leading to improved demand for tiles. Further, exports are likely to sustain their growth momentum into the current year, driven by the rising cost competitiveness of Morbi players compared to their global peers.
The annual growth in Indias household spending per capita at 7.8% will outpace that of other developing Asian economies like Indonesia, Philippines and Thailand. The countrys ongoing urbanisation will also help boost consumer spending as companies can easily access consumers and open more physical retail stores to cater to them.
BMI estimates Indias household spending will exceed US$3 trillion as disposable income rises by a compounded 14.6% annually until 2027. By then, a projected 25.8% of Indian households will reach US$10,000 in annual disposable income.
MEDIA COVERAGE THAT SUGGESTS INTERESTING GROWTH PROSPECTS
"New retail real estate space supply is expected to rise 43% across seven major cities by 2027 as developers are expanding their business amid strong revival after the pandemic, according to a JLL India report India Retail: Evolving to a new dawn."
The Economic Times, Jan 4, 2024
"Prime Minister Narendra Modi inaugurated 15 airport projects, entailing a total capital expenditure of Rs 9,800 crore and includes new terminal buildings at 12 airports such as Delhi, Lucknow and Pune."
The Economic Times, March 10, 2024
"Over 28 crore Indian citizens want to buy a house, among the 40-crore population yet to own a house in the country. CREDAI also projects that there will be a 7-crore additional housing demand by 2030."
The Economic Times, March 16, 2024
"The new Cabinet, in its very first meeting since taking office after the General Elections, approved a proposal to build 30 million more homes for urban and rural poor under the Pradhan Mantri Awas Yojana (PMAY)."
Mint, June 10, 2024
"Home builders in India may need to construct as many as 100 million new residential units this decade. This surge in demand is largely driven by rising household incomes in the worlds fastest-growing major economy."
Outlook Business Desk, June 13, 2024
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