Manufacturing Sector's Profitability Surges in 2QFY17 Despite Demonetisation
The manufacturing sector has shown significant improvement in profitability during the second quarter of fiscal year 2017 (2QFY17), compared to the same period last year. This positive trend comes despite expectations of a negative impact from the government's demonetisation move on both sales and profitability of firms going forward.
Net sales of manufacturing firms grew by 3.9% in 2QFY17, reversing a 1.4% contraction experienced in the same quarter a year ago. The sector's bottom-line also saw a notable improvement, growing by 28.3% in 2QFY17, up from 13.6% in 2QFY16. This improved profitability can be partly attributed to a previous slump in commodity prices.
The rally in Brent crude futures, which surged by 15% in the week till 2nd December 2016, posting their biggest weekly gain in over five years, may also have contributed to this positive trend. However, the long-term impact of the government's demonetisation move on the manufacturing sector remains to be seen.
In summary, the manufacturing sector has witnessed a significant improvement in profitability during 2QFY17, with net sales also showing growth. While the recent rally in commodity prices may have contributed to this positive trend, the long-term impact of demonetisation on the sector's sales and profitability is yet to be fully understood.
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