In a sign of the economy coming back on track, the manufacturing and construction sectors landed in positive territory during the third quarter of the financial year 2020-21.
The manufacturing sector posted a growth of 1.6 percent in October to December period of the financial year 2020-21, compared to a contraction of 2.9 percent during the same period last year, according to the gross domestic product (GDP) data released by the National Statistical Office (NSO) on February 26.
After dipping by 35.9 percent in the April-June quarter, mainly due to a nation-wide lockdown, manufacturing gross value added (GVA) came on the recovery track in the July-September quarter, contracting by only 1.5 percent.
Construction also saw a growth of 6.2 percent during the period under review, compared to a contraction of 1.3 percent during the same period a year ago. Trade, hotels, transport, communication and services related to broadcasting saw a contraction of 7.7 percent, against a growth of 7 percent during the same time last year.
“After a contraction for two quarters, the growth rate is back in the green. Q3 GDP growth turned positive on the back of strong performance by agriculture, construction, and manufacturing, the latest data is in line with estimates for a V-shape recovery for the economy,” said Nish Bhatt, Founder & CEO, Millwood Kane International - an investment consulting firm.
A major factor that is taken into account while calculating GDP and GVA is the Index of Industrial Production (IIP). Pushed by festive demand, India’s factory output posted a growth of 1 percent in December and 3.6 percent in October. However, it contracted 1.9 percent in November. According to the Ministry of Statistics and Programme Implementation, the manufacturing sector that constitutes 77.63 of the IIP saw a growth of 1.6 percent in December and 3.5 percent in October. In the month of November, it saw a contraction of 1.7 percent.
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. In October it rose to 58, dropped to 56.3 in November and again climbed to 56.4 in December. PMI numbers above 50 are considered as an indicator that business activity has picked up compared to the previous month.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
