IIP: India’s Industrial Production Shows Strong Pickup In October
Emissions rise from a chemical plants in Ankleshwar, Gujarat. (Photographer: Kanishka Sonthalia/Bloomberg/Bloomberg)

IIP: India’s Industrial Production Shows Strong Pickup In October

India’s industrial output rose for the second straight month after six months of contraction.

The Index of Industrial Production rose by 3.6% in October 2020 over last year. Industrial production rose by 0.5% in September compared to 0.2% estimated earlier, according to data by the Ministry of Statistics and Programme Implementation on Friday.

A poll of economists by Bloomberg had forecast October IIP growth at 1.1%.

Coming on the base of a 6.6% contraction in October 2019, the 3.6% growth in the IIP in October 2020 is decidedly modest, and suggests that caution in the interpretation of the strength of the economic recovery is still warranted.
Aditi Nayar, Principal Economist, ICRA

Rahul Bajoria, chief India economist at Barclays, said that despite a surprise to the upside, industrial production growth may have hit a near-term peak, as inventory replenishment may be coming to an end.

Sectoral Estimates

Among the three key sectors, mining remained in contraction but others saw an expansion in activity.

  • Electricity generation rose by 11.2% in October after rising 4.8% in September.

  • Manufacturing output growth stood at 3.5% compared to a contraction of 0.2% last month.

  • Mining output contracted by 1.5% in October after rising 1.4% last month.

Industrial output, as classified by the end-use of goods, indicated a contraction only in primary goods.

  • Primary goods output contracted by 3.3% in October after a contraction of 1.5% in September.

  • Capital goods output rose by 3.3% after contracting by 1.3% last month.

  • Intermediate goods output rose by 0.8% after a contraction of 1% last month.

  • Infrastructure and construction goods output grew by 7.8% in October compared to a 2.5% increase last month.

  • Growth in consumer durables output was at 17.6% compared to a rise of 3.4% in the previous month.

  • Growth in consumer non-durables output was at 7.5% in October compared to an increase of 2.4% in September 2020.

Capital goods output turned positive after a gap of 21 months, though is still 6% lower than the pre-Covid level, said Sunil Kumar Sinha, principal economist at India Ratings. Only consumer durables surpassed the pre-Covid level production. While positive consumer goods growth in September and October augurs well for the economy, this can at best be termed as green shoots, Sinha said.

Nayar also said that the healthy improvement in the performance of consumer durables and non-durables in October 2020 relative to the previous month, is testament to the expectation of a buoyant festive season. “However, the benefit provided by the low base, especially for consumer durables, can not be ignored. In our view, the underlying strength of demand remains mixed, and is still tentative in some sectors.”

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