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India has been hailed for holding its head high amid a looming global economic slowdown, with the IMF recently calling the country a “bright spot”. A study by asset manager Invesco puts India as the second most coveted market, after the USA, for sovereign and public pension funds in 2022. Morgan Stanley and S&P Global predict the Indian economy will double up and overtake Japan and Germany to become the world’s third largest by 2030, averaging 6.3% growth.

In a year of global upheaval, views like these seem rather surprising. The reasons for such optimism hinge on India’s offshoring, energy transition, digital infrastructure growth and investment in manufacturing. There is a clear focus by government on making India a hub for foreign investors as well as a manufacturing powerhouse, and its main vehicle for doing so is through the Production Linked Incentive (PLI) scheme to boost manufacturing and exports. These PLIs, introduced in 2020, offer incentives both to domestic and foreign investors in the form of tax rebates and licence clearances, among other stimuli. PLIs are wanted as a tool to make India more export-driven and more interlinked in global supply chains.

Currently, the manufacturing sector contributes around 15.6% to GDP, a figure which is likely to exceed 21% by the end of the decade. Supported by trade and finance liberalization and labour market reforms, this should put such ambitious targets within striking reach. But there is a caveat: while the Indian economy does look to be better-placed in relative terms, it cannot insulate itself from any major global mishaps. High internal consumption provides extra cushioning but, with interlocked global supply chains and markets, it would need the world to remain stable and to walk alongside.

Talking of business conditions, it has been a mixed bag. With festive sales done, now is a period of cooling off. Sales of passenger vehicles saw positive traction during November, but there has been a sequential drop in two-wheeler and three-wheeler sales. The coming months could see a further squeeze in all segments as producers factor in rising input costs, with increased interest costs also starting to weigh in.

Export demand for die-casting grade aluminium ingots remains weak, with only some limited, sporadic buying from Japan. The Zorba price continues to be strong, supported by good demand from South East Asia, leaving Indian producers to cut some capacities. Similarly, exports of brass billets/ingots have also been impacted as prices of scrap continue to be high.

The long-term macro factors still look intact and robust in the secondary metals industry in India but, in the immediate term, weak demand and low margins have impacted performance.