Graded pick-up: India’s May industrial production gathers steam

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New Delhi, July 10 | Even though India’s May factory output showed a graded pick-up, the country’s industrial activity still remained in the doldrums.

As per the Quick Estimates of Index of Industrial Production (IIP), on one hand, industrial activity picked up pace in May from April but was far too slow when compared with the like period of last year.

On a sequential basis, the Quick Estimates of Index of Industrial Production for the month of May 2020 stood at 88.4 (index reading) as compared to 53.6 for April 2020, indicating a graded pickup in industrial activity.

However, on a year-on-year basis, the rate of factory output during the month under review was far lower than the level recorded during May 2019.

As per the data, the IIP had recorded an index reading of 135.4 in May, 2019-20 (-34.71 per cent).

The estimates documents released by the Ministry of Statistics & Programme Implementation said that current indices should not be compared with that of months preceding the COVID-19 pandemic.

“In view of the preventive measures and announcement of nationwide lockdown by the government to contain spread of COVID-19 pandemic, majority of the industrial sector establishments were not operating from the end of March, 2020 onwards. This has had an impact on the items being produced by the establishments during the period of lockdown and the subsequent periods of conditional relaxations in restrictions,” the statement said.

“The number of units responding has improved in May 2020 as compared to the earlier months of lockdown. The weighted response rate at time of QE of April 2020 was 87 per cent which is now revised upwards to 91 per cent at first revision.”

Besides, the pace of recovery in industrial output was mixed across sectors in May 2020.

Nevertheless, manufacturing showed the biggest improvement.

The output rate of the manufacturing sector rose to 82.4 in May from April’s 41.5 and 135.8 in the like period of last year.

Similarly, the mining activity grew by 87 from a YoY growth 110.1 and 78.7 index reading in April.

The sub-index of electricity generation was higher by 149.6 per cent from a rise of 125.5 in April and 176.9 in May 2019.

According to Aditi Nayar, Principal Economist, ICRA on IIP data: “The IIP data for May 2020 confirms our conviction that economic activity hit a trough in April 2020 and will record an uneven recovery in the subsequent months.”

“However, the rising infections and imposition of localised lockdown in many states, are raising red flags about the pace of normalisation that we should expect in the ongoing quarter. Economic activity is likely to tread a bumpy path in the coming months, in our view.”

Among the six use-based classification groups, the output of primary goods, which has the highest weight of 34.04, improved to 105.5 in May when compared to April.

The output of intermediate goods, which has the second highest weight, stood at 77.6 from 42.8 in April.

While consumer non-durables’ output also rose to 132.3 from 71.8, the consumer durables increased to 42.2 from 5.1. Output of construction goods edged up to 84.1 from 20.6, and capital goods’ production augmented by 37.1 from 7. 1.

“Clearly, the MoM growth for May is very high due to the base effect of April and reflects the fairly good pick-up in production in some of the core sectors as well as in consumer non durables. What is noteworthy is the YoY growth of 2.5 per cent in pharma sector output in the context of the magnitude of contraction in other sectors,” said Suman Chowdhury, Chief Analytical Officer at Acuite Ratings and Research.

“The volatility in the electricity output is relatively less given its usage in the household sector but it is encouraging to see that electricity generation is almost at the same level as in the pre-Covid month i.e Feb 2020, reinforcing the data on industrial recovery.”

Source: IANS

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