India Market Watch: Cement Production Declines, New Unemployment Data

Cement production declines for first time since 2001

In its first decline in 15 years, cement production in India fell by 13 percent year-on-year in January. The drastic overall decline was a direct outcome of the government’s sudden demonetization, which badly hit the real estate and construction sectors. Consequently, production levels of cement slowed down by 0.5 percent in November, and plummeted by 9 percent in December 2016 – due to its industrial linkages with the housing, infrastructure, and commercial sectors.

Nevertheless, manufacturers and analysts alike are surprised by the limited scope of de-growth, and confidently predict a positive turnaround in two to three months. A faster recovery in southern and eastern parts of India will drive demand for cement production, though cement prices will rise as fuel costs factor in the sharp rise in the price of coal and petroleum coke.

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High youth unemployment even as overall unemployment rates decline

Two recent reports highlight polar aspects of India’s huge labor market – high unemployment among the country’s youth and the falling rate of overall unemployment. While their differing results might be an outcome of methodology, it points to key trends in the Indian economy.

According to the Organisation of Economic Cooperation and Development (OECD), job creation in India has not kept pace with the burgeoning working age population, despite GDP growth projected at 7 percent for 2017-18. The OECD notes that over 30 percent of India’s youth are not in employment, education, or training (NEETs) – double the OECD average and almost triple China’s figure.

NEET is a new concept. It identifies the level of youth inactivity in an economy, which is important when formulating job growth policies. The OECD report underlines the problems with India’s corporate hiring strategies, which often favor temporary labor contracts, as well as the poor tracking of employment data at the national level.

On the other hand, a February report by the State Bank of India (SBI) shows that the unemployment rate in India halved from 9.5 percent in August 2016 to reach 4.8 percent in February. The decline in unemployment was particularly visible in Uttar Pradesh state – declining from 17.1 percent to 2.9 percent, followed by Madhya Pradesh (10 percent to 2.7 percent), Jharkhand (9.5 percent to 3.1 percent), Odisha (10.2 percent to 2.9 percent), and Bihar (13 percent to 3.7 percent).

The SBI report derived its results from surveying members of 15 years and above through a random selection of households.

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Liquor gets expensive in Haryana

The excise policy for 2017-18 will see a 20 percent increase in the prices of all brands of country liquor, Indian Made Foreign Liquor (IMFL), and foreign liquor in the state of Haryana (including Gurugram and Faridabad excise zones). Touted as a ‘vendor friendly’ policy, it also provides more choice to retailers to sell any kind of brand of liquor from the same establishment as well as freedom to choose up to two locations in the allotted zone (in order to compensate for the ban imposed by the Supreme Court against liquor establishments along highways).

The new excise policy will raise costs of drinking in pubs and bars as the license fee for such establishments is increased to US$22,485.72 (Rs 1.5 million) per annum from US$17,988.58 (Rs 1.2 million) previously, other excise duties notwithstanding. (US$=Rs 66.71).

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