IIP: India Industrial Production Rose To Seven-Month High In February

India’s economy was showing some signs of recovery, before a spread of the Covid-19 virus brought economic activity to a near standstill.

The Index of Industrial Production rose 4.5 percent in February 2020 over last year, compared to an increase of 2 percent in January. Twenty eight economists polled by Bloomberg had forecast February IIP growth at 3.4 percent.

Industrial production in February was the highest since July 2019.

IIP: Sectoral Estimates

Among the three key sectors, mining and electricity led the growth in production. 13 of 23 manufacturing industry groups showed a positive growth in February on an annual basis.

• Manufacturing output rose 3.2 percent in February compared to 1.5 percent in January.
• Mining output rose 10 percent as against 4.4 percent last month.
• Electricity generation rose 8.1 percent compared to 3.1 percent in January.

Industrial output, as classified by the end-use of goods, showed that consumer demand remained tepid.

• Consumer durables output contracted by 6.4 percent after contracting by 4.4 percent in January.
• Consumer non-durables output was flat in February 2020, after contracting by 0.3 percent in January.
• Capital goods output contracted by 9.7 percent as against a contraction of 4.3 percent growth in the previous month.
• In contrast, intermediate goods output rose 22.4 percent compared with 15.8 percent last month. Primary goods output rose 7.4 percent in February compared with 1.8 percent in January.

A Dramatically Changed Outlook

These numbers no longer capture economic conditions since a 21-day nationwide lockdown has impaired industrial activity along with normal functioning across the services sector.

The Purchasing Managers’ Index captures this to some extent. The IHS Markit India Manufacturing PMI fell to 51.8 in March on a seasonally adjusted basis, from 54.5 in February. The Services PMI fell to 49.3 in March, down from February's 85-month high of 57.5.

Economists expect economic data to reflect the worsening conditions starting April. Most have pared the forecasts for GDP growth for FY21. Goldman Sachs forecasts GDP growth will fall to 1.6 percent, Fitch Ratings expects it to settle at 2 percent.