Industrial Production Growth Estimated At 134.4% In April Due To Low Base Effect

Industrial production grew by 13.4 per cent in April 2021 from a year earlier, government data showed on Friday, June 11, registering a sharp recovery as a result of the base effect due to the COVID-19 lockdown that hit economic activity last year. The industrial output index increased to 126.6 in April from 54.0 in the corresponding month last year. The industrial production, or the factory output, gauged by the Index of Industrial Production (IIP), grew 22.4 per cent in March. (Also Read: Retail Inflation Likely Rebounded To 5.30% In May 2021: Poll )

According to the industrial production data released by the Ministry of Statistics and Programme Implementation, the indices for the mining, manufacturing, and electricity sectors for April 2021 stand at 108.0, 125.1, and 174.0, respectively. The government did not release the data in percentage terms. Even though industrial production registered a surge of 134.4 per cent from last year, but it witnessed a decline of 13 per cent month-on-month, as the index stood at 145.5 in March 2021.

The industrial production was higher than a poll conducted by news agency Reuters last week, which estimated that the factory output likely jumped 120 per cent in April, from a year ago. The Reuters poll conducted with more than 50 economists, predicted the retail inflation in May 2021 likely rebounded to 5.30 per cent, driven by higher rates of food and energy.

Moreover, the country's output of the eight core sectors — also known as the infrastructural output, and accounting for about 40 per cent of the total industrial production, rose 56.1 per cent in April.

According to use-based classification, the indices stand at 126.7 for primary goods, 137.9 for intermediate goods, 82.4 for capital goods, and 134.8 for infrastructure or construction goods in April 2021. The indices for consumer durables and consumer non-durables stand at 112.4 and 142.3 respectively.
 

What analysts say:
 

Ms. Madhavi Arora, Lead Economist, Emkay Global Financial Services:

“Industrial production super-surged in April, growing 134 per cent amid favorable base effects despite weakening momentum. On a sequential basis, April IIP degrew 12 per cent, reflecting hit on production activity as major states like Maharashtra and Delhi led the localized lockdowns. We note Maharashtra has 18 per cent share in India's manufacturing GVA.

''The May IIP sequential growth may also be impacted owing to more pronounced localised lockdowns state wise....We see FY22 GDP growth at 9.0 per cent....The recovery ahead may again be led by capital and profits and not improving labor markets and wages.''
 

Mr. Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm:

“Industrial production grew at 134 per cent for the month of April 2021 despite lockdown. There cannot be an absolute comparison as the astonishing figure is due to its comparison to the data recorded last year for the same month (April 2020) where most parts of the country were facing a severe lockdown. The industrial growth has slowed down 13 per cent if compared month on month (March '21 vs April '21).

''Moving forward, the industrial activity will pick up on a durable basis only once the pace of vaccination reaches a substantial milestone, number of cases comes under control and the respective state governments allow permission for regular economic activities.''

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research:

''...The overall IIP in April 2021 has witnessed a slightly positive growth of 0.1 per cent although the manufacturing sector has contracted by 0.9 per cent vis-à-vis April 2019.....Undoubtedly, the nascent momentum in IIP seen over Q3/Q4 of FY21 has received a setback in April-May but a rapid taper down of the daily infection numbers and the urgency around vaccination, have raised hopes for a quick rebound of the IIP trajectory.

''While almost all the segments under the manufacturing sector have been affected initially by the economic slowdown and thereafter by the pandemic, it is interesting to note that the metals segment has recorded a growth of 15.1 per cent over a two-year period.''