According to rapid estimates from the National Statistical Office (NSO) released on Friday, India’s industrial production (IIP) grew at the fastest pace in eight months in October 2020 at 3.6 percent, with consumer durable output exceeding levels last seen before the COVID-19 pandemic.
This was the second month in a row of positive growth in industrial production, but economists were careful to term it a ‘turnaround’ as the numbers in October were reinforced by pent-up and festive demand.
In light of updated data, the NSO also revised upwards its estimates for September’s industrial production growth from 0.2 percent to 0.5 percent. So far, overall industrial production in 2020-21 is now 17.5 percent lower than the period between April 2019 and October 2019. In October, electricity generation grew 11.2 percent compared to a 12.2 percent decrease a year earlier, while manufacturing activity grew 3.5 percent compared to a contraction of 5.7 percent in October 2019. Mining decreased by 1.5 percent.
In manufacturing, broad-based growth is important. Growth in machinery has turned positive, which is reflected in capital goods, said Madan Sabnavis, chief economist at CARE Ratings.
“Whether this positive growth (IIP) can be sustained for another two months needs to be seen before we can conclude that a turnaround is taking place,”Madan Sabnavis, chief economist at CARE Ratings.
For the first time in October in 21 months, capital goods showed positive growth. Primary goods, however, continued to record negative growth (-3.3%), while intermediate goods reported a dim 0.8% growth, suggesting that the recovery was dissipated and uneven. India Principal Economist Sunil Kumar Sinha’s ratings agreed, stressing that while positive IIP growth is a good sign for two consecutive months, it is important to wait a few more months to believe that the economy is firmly recovering.
What is IIP?
The Industrial Production Data Index or IPI, as it is generally referred to is an index that monitors the activity of production in different sectors of an economy. The first attempt to compile and release the IIP with the base year 1937 was made by the Office of the Economic Advisor, Ministry of Commerce and Industry, covering 15 major industries, accounting for more than 90 percent of the total output of the selected industries.