As the low base effect slowly wears off, industrial production in India continued to stabilise in August, expanded by 11.9 percent year-on-year (YoY) in August, rising slightly from 11.4 percent in July.
Measured by the Index of Industrial Production (IIP) data, which was released by the Centre on October 12, industrial output maintained a steady pace in the latest month.
IIP has maintained significant growth from March 2021 onwards, aided by a continuing low base effect. Case in point, industrial production rose by 13.6 percent in June, 27.6 percent in May and recorded a massive 134 percent rise in April. Till July, experts had said the indices for the months in 2021 were not strictly comparable with the same months from 2020, when the nationwide lockdown was in full force and a majority of factories were not operating.
However, this effect is now slowly wearing off as industrial production is now being calculated based on their annual differences with months after the first wave was controlled, and lockdowns were lifted.
"Encouragingly, the IIP rose by 3.9 percent in August 2021 relative to the pre-Covid level of August 2019, led by all the categories except consumer durables, highlighting the enduring impact of the pandemic on big-ticket demand," Aditi Nayar, Chief Economist at ICRA said.
Manufacturing growth continues
In August, the manufacturing sector saw output increase by 9.7 percent, at a pace slightly lower than July's 10.4 percent, and at a pace slower than the 13 percent rise in June. It had jumped by 34.5 percent in May and nearly 200 percent in April. Compared to July 2019, manufacturing output was lower by 2 percent.
Manufacturing had been in freefall for most of 2020 given the series of total lockdowns implemented at the national and regional levels. But inherent stress in the sector had become visible even before the pandemic hit.
In August, 20 of the 23 sub-sectors within manufacturing posted a year-on-year growth, the same as July. Interestingly, the manufacturing of pharmaceuticals and medicinal chemicals continued to see a contraction in July, apart from furniture and tobacco.
The crucial capital goods segment, which denotes investment in industry, rose by 19.9 percent, after rising by 30.4 percent in July. It had risen by a slower margin of 26.6 percent in June, after a 78.2 percent rise in May and a massive 1077 percent rise in April.
"With the excess rainfall affecting mining, electricity and construction activities, and the non-availability of semiconductors impinging upon auto output, we expect the IIP growth to dip sharply to 3-5% in September 2021," Nayar added.
Subsequently, the healthy GST e-way bill generation for early October 2021 suggests inventory buildup ahead of the festive season, which augurs well for the IIP print for the current month, even as continued constraints in the auto sector and the looming concerns on availability of coal and power pose risks, she added.
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