Industrial Production Rises To 13.6% In June Due To Low Base Effect

Industrial production grew by 13.6 per cent in June 2021 from a year earlier, government data showed on Thursday, August 12, 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 122.6 in June from 107.9 in the corresponding month last year. Industrial production - or the factory output, gauged by the Index of Industrial Production (IIP), rose 29.3 per cent in May on jump in manufacturing activity. (Also Read: Retail Inflation Eases To 5.59% In July From 6.26% In June As Food Prices Drop )

The indices for the mining, manufacturing, and electricity sectors for June 2021 stand at 105.5, 121.0, and 169.1, respectively, according to the industrial production data released by the Ministry of Statistics and Programme Implementation

The manufacturing sector, which comprises 77.63 per cent of the index of industrial production, grew 13 per cent in June 2021, compared to a de-growth of 17 per cent in the year-ago period. The mining output also climbed 23.1 per cent and power generation increased by 8.3 per cent.

The output of capital goods - a barometer of investment, grew 25.7 per cent in June, compared to a de-growth of 37.4 per cent in the year-ago period. The output of consumer durables increased 30.1 cent last month, compared to a decline of 34.8 cent in the year-ago period. The output of consumer non-durable goods production fell by 4.5 per cent in June 2021, compared to a growth of 6.9 per cent in the year-ago period.

Moreover, the country's output of the eight core sectors — also known as the infrastructural output, grew 8.9 per cent in June 2021, according to government data released on July 30. The infrastructure output, comprising the eight core sectors including coal, crude oil, electricity, among others recorded a growth of 25.3 per cent in the April-June period of the current fiscal, compared to a de-growth of 23.8 per cent in the corresponding period last year. 

The eight core industries comprise 40.27 per cent of the weight of items that are included in the industrial output or the IIP. The growth in the infrastructure output was led by the steel sector, followed by the natural gas and coal sectors in June 2021. (Also Read: Infrastructure Output Of Core Sectors Rises 8.9% In June 2021 )
 

What analysts say:
 

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

'The June IIP data at 13.6 per cent is mainly on account of ease in lockdowns, favorable base. The Industrial production data is expected to improve further as the vaccination drive covers a larger part of the population, capex cycle picking up.

 A fall in inflation and recovery in IIP will help the central bank to continue with its accommodative and easy monetary policy till growth picks up completely.”

Mr Vivek Rathi, Director, Research, Knight Frank India:

'In case of IIP index, besides the base period impact, growth of 13.6 per cent in June 2021 is chiefly influenced by the consumer durables and capital goods segments. With adequate system wide liquidity and low interest costs, sustainable pick-up in consumer demand will be awaited as a key catalyst for broad based economic recovery.'

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

“The IIP print for Jun-21 at 13.6 per cent YoY reflected an even better performance than the core sector which had reported an 8.9 per cent YoY growth and indicates that the key industrial sectors are witnessing a gradual output recovery after the taper down of the second wave of Covid. The overall index has also shown a particularly sharp 5.7 per cent sequential rise as compared to May-21.

While the risks of a third wave still persist, steady progress in vaccination has raised hopes for a steady rebound of the IIP trajectory from Q2FY22.”