India's Industrial Output Continues To Recover In July
Growth in India’s industrial output continued to pick up in July, paving the way for a return to pre-pandemic levels. The rebound is being led by the manufacturing sector.
The Index of Industrial Production rose by 7.2% in July 2021 over last month, compared to an increase of 5.7% in June. On an annual basis, the index rose by 11.5% in July.
IIP growth came in slightly ahead of expectations. Thirty-five economists polled by Bloomberg had forecast July IIP growth at 10.1%.
The index rose to 131.4 in July 2021, which is the highest since March this year. The index slipped sharply in April and May as the second wave of Covid infections hit the country. However, more localised lockdowns have limited the extent of fall and allowed from a quicker rise from the trough.
Relative control over the virus outbreak, strong external demand and an easing of the curbs on movement has paved the way for industrial growth normalisation, Rahul Bajoria, chief India economist at Barclays said.
Aditi Nayar, principal economist at ICRA, also said that industrial output in July 2021 trailed the pre-Covid level by a marginal 0.3%, on account of the drag imposed by consumer durables on manufacturing, whereas mining and electricity posted a healthy growth relative to their July 2019 levels.
Manufacturing output rose 8.2% in July on a monthly basis, compared to a rise of 7.4% in June.
Mining output declined by 0.9% in July month-on-month, from a decline of 2.3% the previous month.
Electricity generation rose by 9.2% in July, compared to a rise of 4.4% in June.
In sequential terms, the rise in manufacturing output is much lower than the corresponding 17% change in the generation of GST e-way bills, Nayar said. This may indicate continued inventory clearance as the state-wise restrictions eased.
"Notably, the manufacturing index in July was nearly as high as the level in October during last year's festive season, which offers a glimpse into the strength of the revival after the second wave," Nayar said.
Industrial output, as classified by the end-use of goods, indicated a rise across sectors.
Primary goods output rose 5% in July on a month-on-month basis, after a minor decline of 0.2% in June.
Capital goods output rose by 13.6% in July m-o-m, compared to a rise of 28.1% in the previous month.
Intermediate goods output rose by 7.8% monthly, after a rise of 2.8% in June.
Infrastructure and construction goods output rose 4.2% in July on a monthly basis, compared to a rise of 7% in the previous month.
Consumer non-durables output rose by 3.8% after a rise of 2.9% in June.
Consumer durables output rose by 19.5% in July on a month-on-month basis, after a rise of 31.2% in June.