Heritage Foods Limited | 30th Annual Report 2021-22

30 th Annual Report 2021-22 Heritage Foods Limited 94 Management Discussion and Analysis The Global Economy – World View The global economy grew at a rate of 5.5 per cent in FY 2021, after declining by 3.4 per cent in FY 2020. The rebound was mostly fuelled by a significant increase in family spending and a minor increase in investments, both of which had previously been impacted adversely due to the lockdown restrictions. In FY 2021, the global gross product was 1.9 per cent higher than in 2019, although it was still 3.3 per cent below the actual expected levels before the epidemic. Trade took hold in the first half of FY 2021, after which it started progressing in the second half. The third quarter experienced a slowdown in growth, after which trade picked up again in the fourth quarter. The value of trade in goods increased to $5.8 trillion and services rose to $50 billion. The overall value of global trade reached the value of $28.5 trillion in FY 2021, 25 per cent higher than FY 2020. Global inflation has been steadily increasing, with the median headline Consumer Price Index (CPI) expected to reach 4.6 per cent in May 2021, up from 1.2 per cent in May 2020. Increasing food costs around the world, supply chain disruptions, and a recovery of demand are the main factors of rising headline inflation. Outlook Global growth is expected to touch 4.4 per cent in 2022, down 0.5 percentage point from previous projections. This is mostly due to the slowing of growth in the United States and China as a result of the fiscal and monetary policies, as well as ongoing supply chain issues. Inflation is projected to last longer in both developed and developing countries. Supply chain disruptions are expected to ease during FY 2022 as demand is expected to gradually rebalance. Energy and food prices are projected to rise moderately in FY 2022. Indian Economy – On Growth Path The economic impact of the second wave of Covid-19 was smaller than the impact of the first. The GDP has shown signs of recovery since the second half of FY 2020-21. The Indian economy is expected to experience a growth in GDP at the rate of 9.2 per cent in FY2021- 22 compared to a contraction by 6.6 per cent in FY 2020-21. Source: UNCTAD India’s exports of both goods and services have been good in 2021- 22. Despite rising trade costs, merchandise exports have crossed the US$30 billion mark in eight consecutive months in FY 2021-22. The reasons for rising trade costs are global supply constraints such as fewer operational shipping vessels, exogenous events such as blockage of the Suez Canal and the Covid-19 pandemic in China’s port city, Shenzen, etc. Manufacturing is expected to grow at 12.5 per cent FY2022 after contracting by 7.2 per cent in FY2021. The services sector has been the most impacted during the pandemic. It is projected to grow at a rate of 8.2 per cent after contracting by 8.4 per cent in FY 2020-21. Outlook The GDP of India is expected to grow to 8 %to 8.5 % in FY 2022- 23, primarily due to the widespread vaccine coverage, supply-side reforms, export growth, easing of regulations and increase in capital spending. The projection for inflation in FY 2022-23 is 4.5 % with Q1 inflation being 4.9 %, Q2 at 5 %, Q3 being 4 % and Q4 being 4.2 %. The Indian economy is well prepared for any challenges that it might face in FY 2022-23. The Government is focusing on supply-side reforms too rather than just on demand management. These reforms will include more simplified and efficient processes, deregulation of multiple sectors, product-linked incentive (PLI) schemes etc.