Industrial Output Grew In October Despite Contraction In Eight Core Sectors

The industrial production based on the index of industrial production (IIP) recovered to an eight-month high and grew by 3.6 per cent year-on-year (YoY) as against a contraction by 6.6 per cent in the corresponding month last year and a 0.2 per cent growth in September 2020. According to a recent report by CARE Ratings, the industrial output grew despite the contraction in eight core sectors by 2.5 per cent in October 2020, which almost has a 40 per cent weightage in the index of industrial production. The growth during the month was supported by a favorable base effect which resulted in significant growth registered by the electricity and manufacturing sectors. (Also Read: 'Positive Surprise But Unlikely To Continue': Analysts On Industrial Production In October)

The manufacturing sector rebounded with the resumption of activities, supported by the demand in the festive season. Based upon the use-based classification, a five-year high growth in capital goods, consumer durables, and construction/infrastructure goods output growth at a near two-year high, helped in the overall output to grow. This was suggestive of recovery in investment activities and consumer demand during the festive season. The mining sector output contracted by 1.5 per cent in October 2020 after registering a growth of 1.4 per cent in September 2020. However, the pace of decline in October this year was lower than the 8 per cent fall in the same month last year.

For the first time in almost two years, the production of capital goods increased by 3.3 per cent in October this year, as compared to the 22.4 per cent contraction in the same month last year, suggesting a pick up in investment activities. In line with capital goods, the construction/infrastructure goods production also grew by 7.8 per cent, the highest in the last 22 months supported by a favorable base and pick up of infrastructure activities.

The output growth of consumer durables was at 17.6 per cent, a five-year high supported by demand in the festive season and a favorable base. In October last year, consumer durables had contracted by 18.9 per cent. According to the report, the momentum of industrial production may moderate in November 2020, due to surge in COVID-19 cases during the festive period, which had induced lockdown restrictions in some parts of the country.