ADB keeps India's FY24 growth forecast at 6.4% banking on demand strength

MANILA:TheAsianDevelopment Bank (ADB) has retained forecast for India's economic growth at 6.4 per cent for this fiscal year and 6.7 per cent for the next, as it's bullish that robust domestic demand will continue to support the region's recovery.

In an update to its Asian Development Outlook, the ADB said inflation is expected to continue to ease, approaching pre-pandemic levels as fuel and food prices decline. It forecast 3.6 per cent inflation this year for developing economies in Asia,and3.4percentin2024.

The Indian economy grew 7.2percentinthe2022-23fiscalended March 2023. "Asia and the Pacific continues to recover from the pandemic at a steady pace," ADB ChiefEconomistAlbertPark said.

"Domestic demand and services activity are driving growth, while many economies are also benefiting from a strong recovery in tourism. However, industrial activity and exports remain weak, and the outlook for global growth and demand next yearhasworsened,Parkadded.

In April, the ADB had projected that India's economic growth is expected to moderate to 6.4 per cent in the current financial year due to tight monetary conditions and elevatedoilprices.

Sustained demand from 3PL, automobile and e-commerce sectors to support warehousing leasing; occupancy to remain at 90%: ICRA

MUMBAI: ICRA estimates the industrial and warehouse logistics park (IWLP) supply to grow by 13-15% YoY in FY2024 in the eight primary markets[1] to around 435 million sq. ft., with nearly 52% share of Grade A capacity, while the incremental absorption is estimated to remain at FY2023 levels of around 39 million sq ft. The warehousing sector continues to witness a sustained demand from the third-party logistics (3PL) and automobile sectors, which together accountedfor~53%ofthetotalleased warehousing area in ICRA’s sample[2] as on March 2023. Additionally, the rapid expansion of new-agesectorslikee-commerceand allied services, growing needs of the massive consumption market, and the Government’s focus on Make-inIndiaandthePLIschemespromoting manufacturing have further boosted warehousing demand. The credit profile of warehousing operators is expectedtoremainstable.

Giving more insights, Mr. Tushar Bharambe, Assistant Vice President and Sector Head, ICRA, said: “ICRA expects the Grade A warehousestockfortheeightprimary markets to grow at 17% YoY to 195 million sq. ft. by March 2024 from 167 millionsq.ft.asofMarch2023.Forthe incremental Grade A supply addition of 28 million sq ft in FY2024, the absorption is estimated to be around 24 million sq ft. Over 30% of the current Grade A stock in India is backed by the global operators /investors such as CPPIB, GLP, Blackstone, ESR, Allianz, GIC, and CDCGroupetc.Thelong-termgrowth prospectsfortheGrade-Awarehouses are supported by the increasing focus of the end-user industries on improving operational efficiencies. The 3PL and the automobile sectors, which accounted for around half of the occupied warehousing area as on March2023,areestimatedtogrowat89% and 6-9% respectively in FY2024. Warehousing demand is further expectedtobesupportedbytherapidly expanding e-commerce sector with estimated growth rate of 30% in FY2024.”

The top five markets namely, Mumbai, NCR, Pune, Chennai, and Kolkata, accounted for 75-78% of total IWLPstockinIndiaasonMarch2023, whiletheoveralloccupancyremained healthy at around 90%. As on March 2024, Mumbai and NCR are expected to account for nearly 50% of the total stock. Notwithstanding the favourable growth prospects, the steep increase in land prices poses a challenge for the players as commensurate increase in rental rates would be constrained by the highly competitive nature of the industry, resulting from the presence of many domestic and global players in the sector and emergence of new micro markets. As per ICRA estimates,theequityIRRexpectation of a minimum 15% can be met at rentals of Rs 22 per sq ft per month and above, when the land cost ranges between Rs 1 to 1.5 crore/acre. AnincreaseinlandcostbeyondRs2.5 crore per acre, would require rentals upwards of Rs 26 per sq ft per month to achieve the equity IRR of 15%. ThecurrentaveragerentalsforICRA’s sample set stand at Rs 24 per sq ft per month, which makes aggressive landacquisitionsunviable.

Commenting on the outlook for FY2024, Mr. Bharambe added: “The credit profile of warehousing operators is expected to remain stable, driven by healthy occupancy levels, expected rental escalations resulting in increased rental income and comfortable leverage metrics. ForICRA’ssampleset,theoccupancy levelsareestimatedtoremainhighat 95% in FY2024, while the rentals are expectedtoincreaseby5%inlinewith the contractual escalation in lease agreements. The leverage measured bydebt/netoperatingincome(NOI)is expectedtoremaincomfortablyinthe range of 5.5-6 times in FY2024, improving from 6 times in FY2023 on thebackofincreaseinNOI.”