Factory output rises 29.3% on low base

The story: India’s industrial production (as measured by IIP) grew 29.3 per cent in May '21 as compared to the same period in 2020, as the impact of a

Factory output rises 29.3% on low base

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• The story: India’s industrial production (as measured by IIP) grew 29.3 per cent in May '21 as compared to the same period in 2020, as the impact of a low base continued for yet another month. In May 2020, factory output, measured by Index of Industrial Production (IIP), contracted 33.4 per cent, as factories remained shut due to the imposition of the nationwide lockdown.
• Clarification: "The indices are to be interpreted considering the unusual circumstances on account of the Covid-19 pandemic since March 2020," the ministry of statistics and programme implementation said.

1. On a sequential basis, IIP fell nearly 8 per cent from April 2021, making the impact of the state-wise lockdowns during the second wave of the pandemic in May 2021 evident.
2. The sequential fall in activity levels also reflected in manufacturing activity as well as electricity generation. To get a real picture, the real comparison should be done with pre-pandemic data. Compared with May 2019, the industrial output is lower than the current level.
3. Covid 2.0 was a setback for the industrial output, which had surpassed the pre-Covid-19 level both at the aggregate and also at the use-based classification level in March 2021. Clearly, FY22 has not begun on an encouraging note despite the fact that during Covid 2.0 lockdowns, industries were allowed to remain operational with Covid protocols/lower employee headcounts.

• Total contraction: The cumulative contraction during April-May (2021-22) was 68.8 per cent, compared to a de-growth of 45 per cent during the same period a year ago. Factory output in April 2021 was 94.3 per cent of the February 2020 level. This clearly shows that some of the ground that industrial output had covered till March 2021 has been lost due to the impact of Covid 2.0 lockdowns imposed in different parts of the country.

1. Manufacturing sector output, which accounts for more than 77 per cent of the entire index, saw growth of 34.5 per cent YoY in May 2021 as compared to a contraction of 37.8 per cent during the same period a year ago.
2. A 9.5 per cent decline in manufacturing output from April can be attributed to restrictions imposed across states during the first two months of the current fiscal to control spread of the second wave.
3. Growth in electricity generation stood at 7.5 per cent YoY in May but witnessed a 7 per cent month-on-month contraction, mainly due to low commercial sector demand. Mining activity, which accounts for over 14 per cent of the entire index, grew 23.3 per cent YoY. However, on a sequential basis, it witnessed an uptick of 0.6 per cent from April.
4. As far as use-based classification is concerned, consumer durables output witnessed the sharpest expansion of 98.2 per cent in May 2021 as compared to a contraction of 70.3 per cent in May last year and fell nearly 28 per cent sequentially.
5. Consumer non-durables output grew 0.8 per cent in May 2021, as compared to a degrowth of 9.7 per cent and 3.7 per cent in May 2020 and April 2021, respectively. Sequential decline is indicative of weak consumer demand.

• Summary: Capital goods output, which is reflective of the private sector investment scenario, grew 85.3 per cent, while intermediate goods grew 55.2 per cent in May. On a discouraging note, the index levels for the IIP, its three sectors and all the use-based categories in May 2021 were lower than the pre-Covid levels of May 2019. 

 

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