Nirmal Bang: India’s July IIP Declines 10.4% YoY; GDP Contraction In Q2 May Narrow Significantly

Nirmal Bang Report

Index of Industrial production (IIP) declined by 10.4% YoY in July 2020, marginally better than our estimate of a 12.1% decline and Bloomberg consensus estimate of a 12% decline.

The reading for the previous month was revised up to -15.8% from -16.6% earlier.

The recovery in July 2020 was led by the manufacturing sector which declined by 11.1% YoY after a 16% decline in the previous month.

Mining sector output registered improvement in July 2020 but was still down 13% YoY.

Electricity production registered significant improvement in July 2020 and was down by only 2.5% YoY.

However, 21 of 23 manufacturing sectors were still in the negative territory, barring pharmaceuticals and tobacco products.

Consumer non-durables (mainly FMCG and pharmaceuticals) continued to be the only sector in the positive territory in July 2020. Its output grew by 6.7% YoY in July 2020, but was down from a 14.3% increase in the previous month.

Chemical products’ output, which had turned marginally positive in June 2020, contracted again in July 2020. Overall, the reading suggests that the recovery continues and the contraction in gross domestic product in Q2 FY21 may narrow significantly from the 23.9% recorded in Q1 FY21.

We are working with a GDP contraction of 8.2% in Q2 FY21 and 9.4% in FY21.

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