India GDP data: Manufacturing sector back in positive terrain in Q4FY21

India's manufacturing sector recovered during the fourth quarter of the financial year 2020-21 recording growth of 6.9 percent in January to March period, compared to a contraction of 4.2 percent during the same period last year, according to the gross domestic product (GDP) data released by the National Statistical Office (NSO) on May 31.

On an annual basis though, manufacturing contracted 7.2 percent compared to 2.4 percent during the financial year 2019-20.

After dipping by 36 percent in the April-June quarter, mainly due to a nationwide lockdown, manufacturing gross value added (GVA) came on the recovery track in the July-September quarter, contracting by only 1.5 percent and growing by 1.7 percent in October to December quarter of 2020-21.

A major factor that is taken into account while calculating GDP and GVA is the Index of Industrial Production (IIP), as the manufacturing sector constitutes 77.63 percent of the IIP. The country’s industrial output expanded due to a low base effect in March, rising 22.4 percent after contracting 3.6 percent in February. The IIP had contracted by 0.9 percent in January after rising by 1.6 percent in December.

Though not considered as an input to calculate GDP, the Purchasing Managers Index (PMI-Manufacturing) by IHS Markit is considered as an ideal indicator to track the sentiments in the manufacturing sector. Based on data released by HIS Markit in the first week of May, PMI for April saw a marginal increase to 55.5 after declining to a seven-month low in March at 55.4. PMI numbers above 50 are considered as an indicator that business activity has picked up compared to the previous month.​

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