June IIP rises 13.6% YoY due to low base effect

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A continuing low base effect led to industrial production in India expanding by nearly 13.6 percent year-on-year (YoY) in June, against a 28.6 percent rise in May and a massive 134 percent rise in April. When compared with May 2019; however, the industrial output showed a contraction of 13.4 percent.

Measured by the Index of Industrial Production (IIP), data which was released by the Centre on August 12, industrial output had been contracting till February. But they have jumped sharply since then due to a continuing low base effect.

Experts said the indices for the current months in 2021 are 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. Consequently, there were many units which reported ‘Nil’ production, affecting comparison of the indices for May 2020 and May 2021.

In June, the manufacturing sector saw output increase by 13 percent after rising by 34.5 percent in May and jumping by nearly 200 percent in April. Compared to June 2019, manufacturing output shrank by 16.4 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 June, 17 of the 23 sub-sectors within manufacturing posted a year-on-year growth, down from 22 in May. Interestingly, the manufacturing of pharmaceuticals and medicinal chemicals saw a contraction in June.

Moneycontrol had earlier reported that while Q1FY22 is expected to see a large manufacturing growth, low base effect or otherwise, experts have warned it will not paint a realistic picture of the sector.

Again due to a low base effect, the crucial capital goods segment, which denotes investment in industry, rose by 25.7 percent in June, down from 78.2 percent in May. In April, this was a massive 1077 percent in April, up from 41.9 percent in March.

Before this period began, it had slid by 4 percent in February and 9.6 percent in January, after growing by 1.5 percent in December.

Consumer non durables stood out as the worst affected sectors in June 2021.