India’s Industrial Output Falls To Seven-Month Low In April

Tools and equipment sit on the Innova Crysta compact multi-purpose vehicle (MPV) production line at the Toyota Kirloskar Motor Ltd. plant in Bidadi, Karnataka, India, on Wednesday, Sept. 9, 2020. Photographer: Dhiraj Singh/Bloomberg

India’s Industrial Output Falls To Seven-Month Low In April

India’s industrial output fell to the lowest in seven months amid a resurgence in Covid-19 cases across the country.

The Index of Industrial Production fell 13% over the previous month to 126.6 in April, according to data released by the Ministry of Statistics and Programme Implementation.

Year-on-year, the index jumped 134.4%, according to BloombergQuint’s calculation, on a low base as the nationwide lockdown to curtail the first wave of the pandemic stalled trade.

“It may be noted that the nationwide lockdown and other measures implemented to restrict the spread of Covid 19 pandemic from the end of March 2020, had led to a majority of the establishments not operating in April 2020 and consequently, there were many units which reported ‘nil’ production, affecting comparison of the indices for the months of April 2020 and April 2021,” the ministry statement said.

Thirty economists polled by Bloomberg had forecast April IIP growth over the year earlier at 120.6%.

“While the low base of the nationwide lockdown expectedly boosted IIP growth in April, the pace of annual industrial growth exceeded our expectations, and the index was in line with the pre-Covid level of April 2019,” said Aditi Nayar, chief economist at ICRA.

According to Rahul Bajoria, chief India economist at Barclays, while activity levels dipped in April-May, the hit is still significantly lower than the wipe-out seen in the summer of 2020. “Today’s upside surprise on industrial output gives us further confidence that activity remains resilient in the face of the second Covid wave,” he said.

Sectoral Estimates

All three key sectors saw a decline over the preceding month.

  • The index for manufacturing output stood at 125.1 in April compared with 143.2 in March, contracting 12.6%.

  • Mining output index was at 108 in April compared with 138.7 in March, contracting 22.1%.

  • Index for electricity generation was at 174 compared with 180 in March, contracting 3.3%.

The contraction in manufacturing was narrower than the 17.5% slippage in GST e-way bills generated during the period. This suggests that inventories may have built up, with dispatches being limited by the second Covid surge that was underway in April 2021, said Nayar.

Industrial output, as classified by the end-use of goods, indicated a decline over March across industries.

  • Primary goods output index was at 126.7 in April against 144.9 in March, contracting 12.6%.

  • Capital goods output index was at 82.4 in April against 107.7 last month, falling 23.5%.

  • Intermediate goods output index was at 137.2 compared with 154.9 in March, a fall of 11%.

  • Infrastructure and construction goods output index was at 134.8 against 158.7, a decline of 15.1%.

  • Consumer durables output index was at 112.4 in April compared with 129 in March, a drop of 12.9%.

  • Consumer non-durables output index was at 142.3 in April against 158.7 in March, a contraction of 10.3%.

According to ICRA’s estimates, IIP growth is expected to flatten appreciably to under 20% in May 2021, with an easing of the favourable base effect and the sequential moderation in volumes related to the second Covid surge and widening state-level restrictions. Moreover, the IIP is expected to slip below the pre-Covid level of May 2019 in the just concluded month, Nayar said.

“With fresh cases having moderated substantially and a phased unlocking underway, we expect the sequential momentum to improve over a variety of high frequency indicators in June-July 2021,” she said.

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