IIP rises past pre-Covid level; grows 11.9 per cent in August

Double-digit growth in industrial output can be attributed to the impact of a low base

Industrial output not only grew at a faster clip at 11.9 per cent in August, compared to 11.5 per cent a month ago, it also rose 3.9 per cent, compared to pre-pandemic levels, revealed the data released by the Ministry of Statistics and Programme Implementation on Tuesday.

However, double-digit growth in industrial production can be attributed largely to the impact of a low base. Factory output in volume terms - measured by the Index of Industrial Production (IIP) - contracted 7.1 per cent in August last year due to disruption caused by the Covid-19 pandemic.

Cumulative growth in April-August (2021-22) was 28.6 per cent, compared to a contraction of 25 per cent in the same period a year ago.

“As expected, the IIP expansion recorded mild improvement to 11.9 per cent in August, from 11.5 per cent in the previous month, driven by the positive impact of a subdued rainfall on mining and electricity, even as manufacturing growth moderated,” said Aditi Nayar, chief economist, ICRA.

Manufacturing sector output, which accounts for more than 77 per cent of the entire index, grew 9.7 per cent year-on-year (YoY) in August, compared to a contraction of 7.6 per cent last year. On a sequential basis, it contracted moderately at 0.5 per cent.

Growth in electricity generation stood at 16 per cent YoY in August, compared to 1.8 per cent contraction a year ago, but witnessed 2.2 per cent growth sequentially.

Mining activity, which accounts for over 14 per cent of the entire index, grew 23.6 per cent YoY, compared to a contraction of 8.7 per cent, but witnessed degrowth of 0.8 per cent sequentially.

“Encouragingly, the IIP rose 3.9 per cent in August, relative to the pre-pandemic levels of August 2019, led by all categories, except consumer durables, highlighting the enduring impact of the pandemic on big-ticket demand,” added Nayar.

Consumer durables output witnessed 8 per cent growth in August, compared to a contraction of 10.2 per cent during the same period last year. Consumer non-durables output witnessed degrowth of 5.2 per cent in August, compared to a contraction of 3 per cent last year.

Capital goods output - reflective of the private-sector investment scenario - grew 19.9 per cent, compared to 14.4 per cent contraction last year.

Nayar, however, warned that with excess rainfall affecting mining, electricity, and construction activities, and the non-availability of semiconductors impinging upon automobile (auto) output, IIP growth may dip sharply to 3-5 per cent in September.

“Subsequently, a healthy goods and services tax e-way bill generation for early October suggests inventory build-up ahead of the festival season. This augurs well for the IIP print for the current month, even as continued constraints in the auto sector and the looming concerns on availability of coal and power pose risks,” she added.