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The Large-Scale Manufacturing (LSM) posted 9 percent cumulative growth for 9MFY21, continuing with the trend reversal that started with the beginning of FY21. The low base came into play for March 2021, which registered 22 percent year-on-year growth, the highest monthly increase in at least five years. The cumulative growth at 8.99 percent is also the highest since September 2017.

The cumulative 9M LSM index was at its highest ever at 150.5, led by double-digit growth in food, beverages and tobacco, and non-metallic mineral sectors. The non-metallic mineral sector is headlined by cement industry, which is responsible for almost the entire contribution of 2.9 percentage points to the cumulative 9M growth. Cement sector’s weight in the LSM index at 5.3 percent is less than half of food’s, but the overall impact is higher due to 24 percent year-on-year growth.

Sugar, wheat milling, and cigarettes lead the way in the food, tobacco sub-sector, with year-on-year growth in high teens. Owing to early crushing, the food sector growth was significantly higher from Nov-Jan, and has somewhat slowed down since, expectedly. Sugar production at 5.6 million tons is still 16.6 precent higher year-on-year, although March saw negative 55 percent growth. Sugar carries the highest weight in the food, beverages, and tobacco category, with over one-fourth share.

Bumper wheat crop seems to have played its part in the wheat and grain milling increasing by a massive 62 percent year-on-year, to a record 8.9 million tons during 9MFY21. There are indications from market sources that the upcoming wheat crop would be higher than the previous season, which should keep the trend going. Wheat milling contributed the highest to the food sub-sector LSM growth, with only 1 percent weight in the overall basket.

Whether it is the crackdown on illicit smuggled cigarettes or an organic growth in demand or both – the tobacco production has gone from strength to strength. More than 1.3 billion additional cigarette sticks have been produced in the first nine months of FY21, leading to 18 percent year-on-year growth.

The government’s focus on housing and construction does seem to be yielding results, as evident from sizeable surge in cement sales. The growth around 20 percent seems to have become the new norm and sector observers expect the trend to continue, further supported by major players undergoing significant expansion.

Beyond the big growth contributors, the overall LSM recovery continues to expand the range and looks more broad-based than earlier. Over 70 percent of the LSM items returned positive growth for March 2021, which is a significant improvement from 50 percent at the beginning of FY21. The ones registering negative growth are not the ones with significant weights in the LSM basket.

Some of the production numbers for April 2021 are out and the growth trend seems to be continuing in cement, automobile, and petroleum sectors. It is safe to assume the full year FY21 LSM growth would be deep into double digits, and higher than what was envisioned 10 months ago. Should the last quarter yield 3-year high values for respective months, LSM growth could well clock 15 percent.

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