Manufacturing, mining and power generation recorded double digit growth in July
India’s industrial output in July grew by 11.5% compared to a 10.5% contraction a year ago, according to a quick estimate by the National Statistical Office (NSO) released on Friday.
Production as measured by the Index of Industrial Production (IIP) grew 13.6% in June and 28.6% in May due to the base effects of the national lockdown in 2020, which hit most economic activities.
According to the IIP, manufacturing, mining and power generation registered double-digit growth of 10.5%, 19.5% and 11.1%, respectively, in July. Last July, these sectors had decreased by 11.4%, 12.7% and 2.5%, respectively.
The overall IIP in July was still around 0.3% lower than the 2019 level, but the marginal difference suggests that the industrial sector may be on the verge of returning to pre-pandemic levels if the trend continues in the coming months.
Among the use-based components of industrial production, production of consumer non-durables declined 1.8% in July. Last July, it was the only category to register a growth of 1.8%.
CARE Ratings Chief Economist Madan Sabnavis pointed out that last year as well as this year it was the only sector that was fully operational, as these goods were deemed essential.
ICRA Chief Economist Aditi Nair said contraction in the category for the second consecutive month hit a ‘disproportionate’ note, even as the July manufacturing index was at par with October 2020 levels during last year’s festive season. “It offers a glimpse into the strength of the revival after the second wave,” she said.
All other use-based components reported a double-digit rebound from 2020 levels – capital goods grew by 29.5%, while consumer durables grew 20.2% and intermediate goods production by 14.1%.
Barring base effects, reviving demand in the coming months will be key to sustain growth, especially for consumer durables, Mr Sabnavis said.
“We can expect a higher IIP growth rate in August as well, as there was a slowdown in growth last year. However, from September, the Aadhaar effect will subside sharply as the growth in the next two months was positive,” Mr Sabnavis said.
“Sequentially, manufacturing output grew by 8.2% in July 2021, which is much lower than the 17% change in GST e-way bill generation,” Ms Nair said.
“We believe that the latter represents continued inventory clearance as the state-wise restrictions are eased. Thereafter, the GST e-way bills remained flat in August 2021 at the level of the previous month, which may be due to stabilization in remittances rather than a sign of stabilization of the growth momentum,” she explained.
NSO revised its industrial production estimates for April 2021 to 133.5% from 134.4% calculated earlier, urging caution in interpreting these growth rates ‘from March 2020 due to the COVID-19 pandemic’ Due to unusual circumstances’.
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