India’s industrial activity accelerated in October with a rise of over 3.5 per cent in factory output on a year-on-year basis, official data showed on Thursday.
As per the Quick Estimates of Index of Industrial Production (IIP), the factory output grew by 3.6 per cent in October 2020 from 0.49 per cent in September and (-) 6.6 per cent during the corresponding month of the previous year.
“For the month of October 2020, the Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 stands at 128.5,” the Ministry of Statistics and Programme Implementation said.
“The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of October 2020 stand at 98, 130.7 and 162.2, respectively.”
The IIP had been in the negative territory from April to August FY21 due to the Covid-19 pandemic and the subsequent lockdown to curb its spread.
Among major segments, manufacturing production grew by 3.5 per cent from (-) 5.7 per cent reported for the corresponding month of last year.
Similarly, electricity generation grew by 11.2 per cent from (-) 12.2 per cent during October 2019.
However, mining output de-grew by (-) 1.5 per cent on a YoY basis.
Furthermore, the data on a YoY basis showed that manufacturing of primary goods de-grew by (-) 3.3 per cent, whereas capital goods production rose by 3.3 per cent, and intermediate goods inched higher by 0.8 per cent.
On the other hand, the production of infrastructure or construction goods grew by 7.8 per cent and consumer durables by 17.6 per cent.
The sub-segment of consumer non-durables showed a growth of 7.5 per cent.
“While the IIP growth stood at an eight month-high, and displayed its best performance since the pandemic struck, the pace of the improvement in October 2020 was feebler than expected,” said Aditi Nayar, Principal Economist, ICRA.
“Coming on the base of a 6.6 per cent contraction in October 2019, the 3.6 per cent 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.”
She pointed out that a variety of available indicators such as output of coal, electricity, non-oil exports and GST e-way bills have revealed that the pace of growth flagged in November 2020, on account of a combination of an unfavourable base effect, fewer working days related to the shift in the festive calendar, as well as some slack after the satiation of pent-up demand.
“Based on the available information, we anticipate a slide in the IIP growth in November 2020,” Nayar said.
“Moreover, a slippage back into a mild contraction in November 2020, can not be ruled out at this point.”
Sunil Kumar Sinha, Principal Economist, India Ratings and Research, said: “No doubt two consecutive months of positive IIP growth is a good sign for the economy, India Ratings and Research (Ind-Ra) is only cautiously optimistic and may wait for few more months to believe that economy is firmly on a path of recovery since in the past IIP growth, more than once, has collapsed after couple of months of good growth.”
Emkay Global’s Lead Economist Madhavi Arora said: “Overall, the trend hints at sequential improvement in demand in line with other high frequency indicators but the data still is somewhat fogged by pent-up and festive led demand.”
“That said, 3QFY21 and 4QFY21 would see the V-shaped recovery continue.”
