The Indian economy recorded the strongest rebound among the G20 nations in 2021. However, the economy is losing its impetus due to sustained inflationary pressure, and rising global energy and food prices. Deteriorating global conditions and contractionary monetary policies have also contributed to this. As per OECD estimates real GDP in India is expected to grow by 6.9% in FY 22-23 and 6.2% in FY 23-24. Thus overall growth is expected to be moderate in the year to come.
The Transformer industry as a whole has been facing headwinds for many years before the COVID pandemic. Although FY 21-22 sales have increased 34% over FY 19-20 (pre-COVID), intense competition and decreased demand have led to severe pressure on price levels. Order booking has been lower in FY 21-22 due to delayed finalizations by electricity boards and a slackening in demand from industry. However, the pace of government and industry procurement is increasing this year and we expect things to limp back towards normalcy in the near future. We have increased our focus on industry once again and are already seeing more inflow from this segment. Renewed efforts have seen a substantial increase in overall order booking over the past few months.
The Motor business has done well to capitalize on market growth and register a robust 55% year on year growth. Developing adequate vendor capacity early on to minimize disruptions in the supply chain have reaped their rewards. Analysis and better engagement of our channel network has enabled us to grow it significantly. We have also focused on and increased our geographic coverage in tier 2 and tier 3 cities considerably. Another feather in our cap has been the successful effort to optimize costs without sacrificing performance. It is noteworthy to mention that we have expanded capacity despite the challenges of the lockdown. In the coming year volatile commodity price movement remains a big concern.
For the Projects division FY 21-22 was a very challenging year. The ability to book orders was severely impacted due to most industrial customers deferring or keeping in abeyance their expansion plans. Despite the sluggish environment we have managed to book some good orders towards the end of the financial year. The current financial year has started on a positive note with a marked increase in order booking.
Drives and Automation has increased sales 29% over the previous financial year. We have been able to successfully market and implement our combined drive-servo motor solutions in various industrial segments. While our focus has been on new customer acquisition there are some exciting new areas we have been working on. Indigenous development of IIOT (Industrial Internet of Things) solutions for various industrial segments has been underway for the last couple of years. These solutions will remotely enable predictive maintenance and production monitoring. Prototypes are ready and undergoing field trials. Another area of progress has been e-mobility solutions for electric buses. We look forward to orders fructifying in this space.
The Magnet Technology Machines division has clocked 15% sales growth over FY 20-21. We have increased our topline despite a sluggish market and a tough business environment. The division has done well to ramp up servo motor production during these tough times. Exports particularly have suffered as a direct fallout of the Ukraine conflict. Sky rocketing commodity prices and severe competition have affected our top and bottom line estimates.
Growth forecasts for the United States, the European Union and China have been revised downward with the European Union accounting for the most significant revision. A debate about whether the inflation levels we see today are temporary, has been raging for some time now. Is this inflation driven more by a sudden increase in demand or by a negative aggregate supply-shock? Both factors are at play. With central banks choosing stability over growth another question is whether there will be a soft or hard landing for global economies. The USA Chairman of the Federal Reserve Jerome Powell has recently stated that a recession is possible and a soft landing will be “very challenging”.
In India too, the RBI has adopted a hawkish stance to tackle inflation with further rate hikes seeming very likely. On a positive note while inflation has risen faster than expected, growth has remained fairly resilient so far. The massive deleveraging of balance sheets in the Indian corporate sector should hopefully contribute to improving the business climate. The creation of the National Asset Reconstruction Company or “bad bank” has been a positive development in this regard. While this is a step in the right direction the Government however needs to speed up on much needed reforms and expenditure.
As always we remain positive and look to the future.