New Delhi: India’s economic data has once again come under question, but this time by the head of one of India’s biggest fast-moving consumer goods (FMCG) companies — Asian Paints.
Asian Paints reported a revenue of Rs 30,850.12 crore in financial year 2023-24, and currently has a market capitalisation of about Rs 2.7 lakh crore.
Speaking to investors and analysts during an earnings call on the company’s fourth quarter and full year 2023-24 results, Asian Paints chief executive officer Amit Syngle highlighted the issue that India’s main GDP growth number doesn’t seem to correlate with the level of activity in the underlying sectors.
“You are correct that the GDP correlation has really gone for a toss, in the current year,” Syngle said, in response to an analyst’s question on why the paint sector’s revenues are no longer correlated with GDP growth. “I also feel that today, I am not very sure as to how the GDP numbers are coming.”
He went on to question whether the GDP data correlated with the “actual GDP” being produced by the underlying sectors of the economy.
“So, even if you look at the core sectors, whether it is steel, cement, so on and so forth, no where it is correlating with the kind of possibly overall GDP growth in terms of what we are kind of talking of,” he said.
“So, we are also looking at ways and means in terms of finding out what is the real GDP,” Syngle added.
His comments come at a time when India’s FMCG sector spent the financial year 2023-24 struggling to increase sales. Asian Paints saw its revenue grow 2.6 percent in the financial year 2023-24, significantly slower than the 19.4 percent revenue growth it saw in the previous financial year.
Hindustan Unilever, India’s largest FMCG company by market capitalisation, reported an anaemic 2 percent growth in revenue in 2023-24. This is down from a 15.5 percent revenue growth in 2021-22.
ITC, too, saw only a 2 percent growth in its revenues in the third quarter of FY24, the latest period for which it has declared results.
Simultaneously, the government is estimating that India’s GDP would have grown 8 percent over the course of 2023-24.
This number doesn’t really represent the growth in India when looking at particular regions or sectors of the country, according to Syngle.
“The correct GDP in terms of what would really be applied to a certain sector is something which I think we need to work and find out,” he said. “Because the GDP is also varying from region to region. If you look at possibly certain regions in the country, some regions are growing faster, some regions are growing slower, but when you get the GDP number overall, that’s a conglomeration of a full number.”
Later in the evening, Asian Paints issued a clarification on Syngle’s comments, saying they were “misinterpreted” and that they were not meant to question the GDP numbers themselves.
“His (Syngle’s) comments were in response to a specific query on the correlation between the growth in the paint industry and the GDP,” the company said in a letter to the stock exchanges. “In that context, it was mentioned that the correlation of the paint industry growth with the GDP growth is varying, and we are unable to correlate both, unlike in the past.”
The letter added that, historically, the paint industry was seen growing at a multiple of 1.5 to 1.75 times the GDP growth but of late, this correlation “was distorted”.
“It was, hence, called out that there is a need for examining the GDP data to understand the reasons for this variance,” the letter said. “The comments were not, in any way, meant to question the sanctity of the GDP numbers as being projected in these posts and articles.”
(This report has been updated to include a clarification from Asian Paints)
(Edited by Tikli Basu)
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