May's YoY industrial output rises on base effect, eases sequentially
New Delhi, July 12, 2021
Low base effect on a year-on-year basis pushed India's industrial output higher by 29.3 per cent, but the production growth rate was slower sequentially.
The Index of Industrial Production (IIP) for May rose by over 29 per cent from a decline of 33.4 per cent reported for the like month a year ago.
However, the production rate was lower than the exponential growth of over 130 per cent seen for April.
In April, the IIP index reading stood at 126.7 as against May's 116.6.
The YoY and sequential growth rate movements are being impacted by the different types of lockdowns imposed during 2020 and 2021.
Last year, while the country observed a full-fledged lockdown, the same was partially imposed across different regions of the country.
"For the month of May 2021, the 'Quick Estimates of Index of Industrial Production' (IIP) with base 2011-12 stands at 116.6," the Ministry of Statistics and Programme Implementation said.
"The Indices of Industrial Production for the 'Mining, Manufacturing and Electricity' sectors for the month of May 2021 stand at 108, 113.5 and 161.9, respectively."
Among the major use-based segments, the May data, on a YoY basis, showed that manufacturing of primary goods grew by 15.8 per cent from (-) 19.6 per cent, while capital goods production rose 85.3 per cent from (-) 65.9 per cent, and intermediate goods increased by 55.2 per cent from (-) 39.7 per cent.
Similarly, the production of infrastructure or construction goods rose by 46.8 per cent from (-) 39 per cent, and consumer durables' production grew by 98.2 per cent from (-) 70.3 per cent.
The sub-segment of consumer non-durables showed a growth of 0.8 per cent from (-) 9.7 per cent.
"A low base continued to support India's industrial growth in May, despite the sequential downturn. Output levels grew by 29.3 per cent y/y, propelled largely by the low base. On a sequential basis, activity softened across sectors, with output in May 2021 still trailing below the levels seen in May 2019. We expect such pandemic-induced low base distortions to impact industrial output prints though Q2 21," Barclay's Chief India Economist Rahul Bajoria said.
"Sequentially, activity softened further, weighed down by restrictions imposed in the second wave... Within manufacturing, large improvements were recorded in motor vehicles and other transport equipment, tobacco and textile products. With lockdown restrictions being eased across states in June-July, we expect activity indicators to recover in the coming months."
India Ratings & Research Principal Economist Sunil Kumar Sinha said: "Index of Industrial Production (IIP) for the month of May 2021 shows a YoY growth of 29.3 per cent and for April-May combined, it shows a YoY growth of 68.8 per cent."
"India Ratings and Research (Ind-Ra) continues to maintain its earlier view that not much should be read out of the YoY growth of industrial activity in the months of April and May 2021 due to the nationwide lockdown imposed during the same months a year ago. As yoy growth numbers would give an inflated view, Ind-Ra would continue to analyse and assess May 2021 IIP data with the pre lockdown month to ascertain where the factory output is in level terms vis a vis February 2020."