Indian Economy Overview
"Despite the global slowdown, Indias economic growth rate is
stronger than in many peer economies and reflects relatively robust domestic consumption
and lesser dependence on global demand," said ADB Country Director for India Takeo
Konishi. "The Government of Indias strong infrastructure push under the Prime
Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative,
logistics development, and industrial corridor development will contribute significantly
to raising industrial competitiveness and boosting future growth."
Despite the three shocks of COVID-19, Russian-Ukraine conflict and the
Central Banks across economies led by Federal Reserve responding with synchronised policy
rate hikes to curb inflation, leading to appreciation of US Dollar and the widening of the
Current Account Deficits (CAD) in net importing economies, agencies worldwide continue to
project India as the fastest-growing major economy at 6.5-7.0 per cent in FY23.
Improving labor market conditions and consumer confidence will drive
growth in private consumption. The central governments commitment to significantly
increase capital expenditure in FY2023, despite targeting a lower fiscal deficit of 5.9%
of GDP, will also spur demand. Helped by recovery in tourism and other contact services,
the services sector will grow strongly in FY2023 and FY2024 as the impact of COVID-19
wanes. However, manufacturing growth in FY2023 is expected to be tamped down by a weak
global demand, but it will likely improve in FY2024. Recent announcements to boost
agricultural productivity, such as setting up digital services for crop planning and
support for agriculture startups will be important in sustaining agriculture growth in the
medium term.
Inflation will likely moderate to 5% in FY2023, assuming moderation in
oil and food prices, and slow further to 4.5% in FY2024 as inflationary pressures subside.
In tandem, monetary policy in FY2023 is expected to be tighter as core inflation persists,
while becoming more accommodative in FY2024. The current account deficit is projected to
decline to 2.2% of GDP in FY2023 and 1.9% in FY2024. Growth in goods exports is forecast
to moderate in FY2023 before improving in 2024, as production-linked incentive schemes and
efforts to improve the business environment, such as streamlined labor regulations,
improve performance in electronics and other areas of manufacturing growth. Services
exports growth has been robust and is expected to continue to strengthen Indias overall
balance of payments position.
However, geopolitical tensions and weather-related shocks are key risks
to Indias economic outlook.
ADB is committed to achieving a prosperous, inclusive, resilient, and
sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme
poverty. Established in 1966, it is owned by 68 members-49 from the region.
Outlook: 2023-24
Dwelling on the Outlook for 2023-24, the Survey says, Indias recovery
from the pandemic was relatively quick, and growth in the upcoming year will be supported
by solid domestic demand and a pickup in capital investment. It says that aided by healthy
financials, incipient signs of a new private sector capital formation cycle are visible
and more importantly, compensating for the private sectors caution in capital
expenditure, the government raised capital expenditure substantially.
Budgeted capital expenditure rose 2.7 times in the last seven years,
from FY16 to FY23, re-invigorating the Capex cycle. Structural reforms such as the
introduction of the Goods and Services Tax and the Insolvency and Bankruptcy Code enhanced
the efficiency and transparency of the economy and ensured financial discipline and better
compliance, the Survey added.
Global growth is forecasted to slow from 3.2 per cent in 2022 to 2.7
per cent in 2023 as per IMFs World Economic Outlook, October 2022. A slower growth in
economic output coupled with increased uncertainty will dampen trade growth. This is seen
in the lower forecast for growth in global trade by the World Trade Organisation, from 3.5
per cent in 2022 to 1.0 per cent in 2023.
On the external front, risks to the current account balance stem from
multiple sources. While commodity prices have retreated from record highs, they are still
above pre-conflict levels. Strong domestic demand amidst high commodity prices will raise
Indias total import bill and contribute to unfavourable developments in the current
account balance. These may be exacerbated by plateauing export growth on account of
slackening global demand. Should the current account deficit widen further, the currency
may come under depreciation pressure.
Entrenched inflation may prolong the tightening cycle, and therefore,
borrowing costs may stay higher for longer. In such a scenario, global economy may be
characterised by low growth in FY24. However, the scenario of subdued global growth
presents two silver linings - oil prices will stay low, and Indias CAD will be better
than currently projected. The overall external situation will remain manageable.
Indian Piping Industry
The Indian Pipe Industry has experienced rapid growth in the last
several years. The major reasons for the growth of this industry is increasing demand for
pipes in the irrigation sector, oil and gas sector and also the real estate industry. The
demand for plastic pipes such as PVC and CPVC is also increasing as these pipes are better
in quality and durability. Infrastructure development, urbanization and the subsequent
development of residential and industrial construction are facilitating the growth of the
pipe industry in India.
Indian plastic pipes industry has historically grown faster than the
GDP led by multiple factors like real estate, irrigation, urban infrastructure and
sanitation projects. Then increased awareness, adoption and replacement of metal pipes
with plastic pipes have also aided this growth. Currently, plastic pipes market is valued
at ~Rs 400bn with organized players accounting for ~67% of the market. By enduse, 50-55%
of the industrys demand is accounted by plumbing pipes used in residential &
commercial real estate, 35% by agriculture and 5-10% by infrastructure and industrial
projects. Going ahead, domestic pipes industry growth is projected to witness higher CAGR
against the past. Between FY09-21 industry grew at 10%-12% CAGR, while demand is
anticipated to expand at 12%-14% CAGR between FY21-25 and more than Rs 600bn by FY25E led
by a sharp increase in government spending on irrigation, WSS projects (water supply and
sanitation), urban infrastructure and replacement demand
The growth drivers of piping industry is the PM Awas Yojana which is on
the mission to provide housing for all got a massive boost of nearly 68% by being
allocated ? 79,000 crore10 in the Union Budget 2023-2024. The existing inventory of
housing has been reduced and this combined with the huge allocation of funds will
translate to a huge demand for affordable housing. Last year the scheme allocated ? 48,000
crore to complete 8 million houses for eligible beneficiaries. This allocation will help
boost the housing sector which would also directly benefit the piping industry to meet
plumbing requirements.
Other relevant government initiatives and schemes include AMRUT - Atal
Mission for Rejuvenation and Urban Transformation, Swachh Bharat Mission, and Pradhan
Mantri Krishi Sinchai Yojana (PMKSY) would further help boost demand in the piping
industry within the country.
These initiatives and schemes combined with strategic planning to
target market with relatively low penetration would further ensure that the piping
industry has the environment for sustained high growth moving forward.
A significant share of the market remains unorganised although the
share of organised players continues to rise. Currently, approximately 65% of the Indian
piping industry is organised with the UPVC segment being 57-58% organised and 80% of the
CPVC market segment being organised. India is the fastestgrowing consumer of PVC and there
remains a large scope for sustained growth. Pipes and fittings form 73% of the end
consumer market for PVC in India with the top 5 players expected to consolidate in market
share.
The biggest drivers of growth in the Indian piping industry are the
rising demand from the irrigation, water supply and sanitation sectors in addition to the
demand for the replacement of metal pipes in the residential real estate market.
These growth estimates are influenced by factors such as:p>
The governments focus on improving irrigation facilities and
infrastructure to increase farmer income.
Improving water supply and sanitation infrastructure
Implementation of "Housing for All" schemes in urban and
rural areas
The discovery of new applications for CPVC and HDPE pipes
Raw material cost fluctuations combined with increasing customer
awareness about quality of products and tax compliance becoming more stringent has led to
an increasing capture of market share by large organised players. This is expected to
continue with the largest organised players gaining more market share even when compared
to other regional organised companies who have struggled with growth.
The piping market is being driven by rapid urbanisation, demand for
large and cost-effective sewage lines, increasing public and private initiatives, and
infrastructure developments, in addition to the factors mentioned earlier. The growing
usage of PVC in flooring applications across private, commercial, and industrial premises
is expected to contribute to the growing demand for PVC Resin.
Opportunities
The future of the Indian plastic pipe market looks attractive with
opportunities in the potable water supply, wastewater supply, agriculture, infrastructure
and chemical sector. While agriculture sector is expected to remain the largest growth
driver, growth of residential and commercial construction and the growth in infrastructure
development are expected to spur growth for this segment. Furthermore, with the key market
players integrating more back-end exploration and refining businesses, alongside
streamlining their sourcing operations, opportunities are expected to increase in the
coming years.
India is facing one of its major and most serious water crises. There
is acute shortage of water in both urban and rural areas due to erratic rainfall patterns
and decreasing natural sources of water. More than fifty percent of the country is
grappling with drought-like conditions and groundwater is declining faster than it is
being replenished. The Union government recently formed a new Jal Shakti (water) ministry,
which aims at tackling water issues with a holistic and integrated perspective on the
subject. The ministry has announced an ambitious plan to provide piped water connections
to every household in India by 2024 which bodes well the industry. Also, the agricultural
sector which currently consumes about 80 percent of water in India is likely to be further
incentivized to adopt water saving techniques using micro irrigation/drip irrigation.
In the past few years, government of India has initiated many new
projects and investments in the irrigation sector. Governments thrust on reviving the
farm sector through various initiatives and reforms such as increasing minimum support
price, direct income support and interest subvention on crop loans augurs well for the
sector. The focus of the government is on rural water management, which will be fulfilled
only when there will be proper infrastructure for the transportation of water to the
end-user. This factor will remain as one of the major drivers for the growth of PVC pipe
industry in the country along with the expansion of housing sector and increasing demand
for oil and gas transportation. It has also been anticipated that both urban and rural
areas in India are likely to suffer from water shortage problems due to erratic rainfall
patterns and decreasing natural sources of water. This will lead to the construction of
more borewells across the country to draw groundwater.
Multiple schemes and projects launched in last couple of years are
leading to higher demand for pipes. Some of the Schemes are as under:
Housing for all by 2022: Pradhan Mantri Awas Yojna (PMAY) is an
GoI initiative in which affordable housing will be provided to the urban poor with a
target of building 2 crore affordable houses by 31 March 2022.
Smart cities mission: It is an urban renewal and retrofitting
program with the mission to develop 100 cities across the country making them citizen
friendly and sustainable. The Government increased allocation for the Smart Cities Mission
by 7% to Rs 6,600 crore in Union Budget 2019. Since the launch of the mission, a total of
5,151 projects have been identified and are in various stages of implementation in 100
cities.
AMRUT: The Atal Mission for Rejuvenation and Urban
Transformation (AMRUT) was launched with the focus to establish infrastructure that could
ensure adequate robust sewage networks and water supply for urban transformation by
implementing urban revival projects. An investment of Rs 50,000 crore has been approved by
the cabinet.
National Rural Drinking Water Programme: The main objective of
this scheme is to provide rural people adequate safe water for drinking, cooking and
ensure that all the sections of the communities have access to safe drinking water. This
scheme seeks to prevent the contamination of water.
Pradhan Mantri Krishi Sinchayee Yojana (PMKSY):
Through this scheme the GoI aims to increase cultivation area with
assured irrigation, reduce wastage of water and improve water use efficiency. The
initiative not only on creating sources for assured irrigation, but also creating
protective irrigation by harnessing rainwater.
Threats
There is a need to keep vigil on the quality of products being offered
in market place as many players have joined the wagon. Constant increase in prices of Raw
Material is a severe issue for the PVC Pipes since it has a direct effect over the prices
of finished goods product demand.
There are many other threats which includes increasing crude oil
prices, import threat from Middle East, neighboring countries specializing in processing
industries could lead to imports and replacement threat from substitutes.
Internal Control Systems
SIL, has in place an adequate system of internal control procedures for
business processes, operations, financial reporting, fraud control and compliance with
applicable laws and regulations, among others. They commensurate with the size of the
company and the nature of the business and is in line with requirements of the
regulations.
We have laid down adequate procedures and policies to guide the
operations of our business. The unit/functional heads are responsible for ensuring
compliance with the policies and procedures laid down by the management. Our internal
control systems are periodically tested by the Management, Statutory Auditors and Internal
Auditors.
M/s. SMAK & CO., the Statutory Auditors of the Company audited the
financial statements expressing an unmodified opinion on the adequacy and operating
effectiveness of the Companys internal financial controls over financial. The same has
been included in this Annual Report and issued a report on the internal controls over
financial reporting (as defined in Section 143 of the Companies Act, 2013).
Human Resources
The company continues to maintain a strong relationship with its
employees, in order to improve their efficiency level at the workplace. The Company
provides employees with numerous opportunities to increase their knowledge, skills and
abilities and enables them to grow in their careers.
Cautionary Statement
The Statement made in this Report on Management Discussions and
Analysis, describing the Companys view may be forward looking statements within the
meaning of the applicable security regulations and laws. These assumptions are based on
certain expectations on demand, imports, and availability of power rates etc. and any
change in Government laws and the economic situation in the country may mark a difference
to the Companys operations. The Company assumes no responsibility in respect of
forward-looking statements herein, which may undergo changes in future for reasons beyond
the control of the Company.
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By Order of Board |
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For Signet Industries Limited |
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Mukesh Sangla |
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Chairman and Managing Director |
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DIN : 00189676 |
Place: Indore |
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Date:12th August, 2023 |
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+91-9892691696
