September IIP rises 3% as low base effect wears off

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As the low base effect slowly wears off, industrial production in India continued to stabilise in September, expanding by 3 percent year-on-year (YoY). While it was lower than the 11.9 percent rise in August, this was due to the low base effect ending by August.

Measured by the Index of Industrial Production (IIP) data, which was released by the Centre on November 12, industrial output maintained growth in the latest month even though the headline figures fell.

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 has now worn 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.

In September, the manufacturing sector saw output increase by 2.7 percent. This was again much lower than August's 9.7 percent. In the previous months, it had risen by 10.4 percent in July and 13 percent in June.

In September, 10 of the 23 sub-sectors within manufacturing posted a year-on-year contraction, up from 3 in August. Interestingly, the manufacturing of pharmaceuticals and medicinal chemicals, apart from furniture and tobacco, managed to come back to the growth charts.

The mining sector grew 8.6 percent year Despite registering yoy growth in September 2021, the output level of both the segments are still lower than the pre-COVID period (February 2020). On the other hand, electricity grew only 0.9 percent yera on year in September 2021 but its output level is higher than the pre-COVID period. Even at aggregate level the industrial output remained lower than the pre-COVID levels.

"Both consumer durables and non-durables recorded negative yoy growth in September 2021. This shows that despite the onset of the festival season, the industrial output has remained subdued. However, this appears to be in contrast with the retails sales figures that has been reported in the media," Sunil K Sinha, Principal Economist ta Ind Ra said.