LSM hits the stride

Large-Scale Manufacturing delivered a strong March close, with year-on-year growth accelerating to 11. 09 percent, the highest in 45 months. The latest reading reinforces the sense that the sector has moved beyond a tentative recovery phase into a more established expansion. Cumulative growth for 9MFY26 now stands at 6. 48 percent, broadly in line with full-year expectations, and marks the first time since FY22 that nine-month LSM readings are firmly in positive territory. The index dynamics are equally telling. March recorded the second highest monthly index level on record, while the July to March cumulative index is also the second best ever, both trailing only FY22. The comparison, however, highlights the scale of the earlier peak. The gap with FY22 remains wide at roughly 28 points, making any catch-up mathematically improbable. Reaching that benchmark would require close to 27 percent average growth over the remaining three months, which is clearly out of reach. What is more relevant is the consistency now visible in the data, with four consecutive quarters of positive growth for the first time since the final stretch of FY22. The recovery continues to broaden across sectors. Fifteen of the 22 sub-sectors are in expansion, while the remaining seven are largely limited to low single-digit declines and carry smaller weights. This distribution has held steady in recent months and suggests that downside risks from lagging sectors are contained. March was once again defined by an outsized contribution from the food sector. The food index reached its highest level for any March since 2022, driven primarily by sugar. Monthly sugar production stood at 1. 3 million tons, nearly four times higher than a year ago. Cumulative output has now crossed 7. 5 million tons and is on track to set a new historical high by the end of the fiscal year. Food alone accounted for nearly three-fourths of total LSM growth in March, outweighing the combined contribution of all other expanding sectors. Other key sectors played a more supporting role. Wearing apparel, after peaking in January, has settled into a more moderate trajectory, with cumulative growth for 9MFY26 at 6. 6 percent. Automobiles continue to post double-digit growth in car production, though momentum is gradually normalizing as base effects build. On a cumulative basis, food has now taken the lead in contribution, followed by automobiles, wearing apparel and petroleum. What differentiates the current phase from earlier upswings is the spread of contributions beyond the traditional leaders. Petroleum, beverages and cement have all added meaningfully to growth, reducing reliance on any single sector. The expansion is no longer narrow or episodic, even if month-to-month contributions remain uneven. Operating conditions are also improving. Capacity utilization in manufacturing is moving closer to historical highs, reflecting stronger demand and better cost visibility. The reduction in energy tariffs has been a key enabler, bringing industrial power prices in line with, and in some cases below, regional benchmarks. External risks have so far remained contained. Supply chain disruptions linked to the ongoing conflict have been limited to specific industries, though some pressure is expected to surface in April, particularly in chemicals due to raw material shortages. The trajectory remains one of steady repair rather than rapid catch-up. Growth has not been explosive, but it has been consistent and increasingly broad-based. With policy support now reinforcing rather than restraining industrial activity, LSM appears to have moved into a more durable expansion phase, even if the highs of FY22 remain well beyond reach for now.

Read full story on Business Recorder