India's industrial output surges 134% in April on low-base effect

Industrial production rose a whopping 134.44 per cent in April on a low year-on-year (YoY) base against 24.14 per cent in March, data released by the National Statistical Office (NSO) on Friday showed. “For April 2021, quick estimates of the index of industrial production (IIP), with base 2011-12, stands at 126.6," the statistics office said.
 
However, this jump in the factory output is partial data, due to the effect of state-imposed restrictions amid the second wave.
 
“It may be noted that the nationwide lockdown and other measures implemented to restrict the spread of Covid-19 from the end of March 2020, had led to a majority of the establishments not operating in April 2020. Consequently, there were many units which reported ‘nil’ production, affecting comparison of indices for the months of April 2020 and April 2021, the NSO stated. Industrial output had shrunk by 57.3 per cent in April 2020.
 
Experts say that industrial growth was flat in April, if we compare the IIP to that in the same month of 2019. “The low base of the nationwide lockdown expectedly boosted the IIP growth to a high 134 per cent in April 2021. Given the comparability issues related to the lockdown in April 2020, we believe that assessing the growth in April 2021 relative to April 2019 provides a clearer signal of the underlying momentum in various sectors, said Aditi Nayar, chief economist, ICRA.
 
"The quick estimates for April 2021, the first revision for March 2021 and the final revision for January 2021 have been compiled at weighted response rates of 85 per cent, 92 per cent and 95 per cent, respectively," the NSO added.

 
Devendra Pant, chief economist of India Ratings and Research, said, “Comparing April 2021 IIP data with April 2019 shows that some of the grounds that industrial output had covered in March 2021 (going by past production levels witnessed during the pre-lockdown month of February 2020) has again been lost in April 2021. Also, whichever way we may look at the IIP data, the level of industrial output of April 2021 does not provide an encouraging picture. And, this is the case when industries were allowed to remain operational during second wave-related lockdowns albeit with strict Covid protocols/lower employee headcounts. Clearly, the path to economic recovery and meaningful economic growth is not a FY22 but FY23 story.”
 
“IIP growth numbers in April and May were bound to be exaggerated this year as last year output had come to a standstill in most sectors. Therefore, the growth numbers for April, which are exceptionally high, need to be ignored. A similar situation would arise in May, too, and it would be only from June that there could be reasonable numbers forthcoming. Growth was negative right up to August, which will tend to give the impression in the economy, which is not the case. It would be better to track PMI, waybills and GST collections to get a fair assessment of activity in this sector," said Madan Sabnavis, chief economist, CARE ratings. 
 
IIP for the mining, manufacturing and electricity sectors for April stood at 108, 125.1 and 174, respectively. According to use-based classification, the indices for primary goods stand at 126.7; 82.4 for capital goods; 137.9 for intermediate goods; and 134.8 for infrastructure/construction goods.