Q1 GDP data | Low base effect helps manufacturing sector growth soar but not reach pre-Covid levels

Manufacturing gross value added stood at Rs 5.43 lakh crore in Q1 FY22. However, it still remained 4.77 percent lower than pre-Covid levels, when calculated against Q1 FY20.

Change in manufacturing GVA over last 2 years

Experts have warned that the latest growth may not paint a true picture of the sector as it is calculated on the basis of the first quarter of FY21 when a nationwide lockdown had shuttered factories, transportation and businesses.

"The more heartening numbers came from the industrial sector which grew by 46.1 percent in 1QFY22. Even its various segments witnessed robust growth in 1QFY22. Manufacturing, mining, electricity/utility services and construction grew at 49.6percent, 18.6percent, 14.3percent and 68.3 percent respectively in 1QFY22," Sunil Kumar Sinha, Principal Economist at India Ratings said.

Since these growth numbers are mostly driven by the base effect, the output level of both industry and its various components in 1QFY22 with the exception of electricity/utility services, is lower than the output level of 1QFY20, they added

While manufacturing had been on a downward slide even before the pandemic hit, it had been hit badly since the nationwide lockdowns were imposed.

After dipping by 36 percent in the first quarter of FY21, mainly due to a nationwide lockdown, manufacturing gross value added (GVA) came on the recovery track in the second quarter, contracting by only 1.5 percent. Subsequently, it grew by 1.7 percent in the third quarter and 6.9 percent. On an annual basis, manufacturing contracted 7.2 per cent in FY21, as compared to a 2.4 per cent fall during FY20.

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 had surged more than 130 percent due to a low base effect in April.