Favourable base effect lifts India’s Dec industrial production


Favourable base effect, along with a broad-based rise in production across sectors, accelerated India’s industrial activity in December, which rose by 1 per cent on a year-on-year basis.

As per the Quick Estimates of Index of Industrial Production (IIP), the factory output grew by 1 per cent in December 2020 from a contraction of (-) 2.09 per cent in November and rose to 0.4 per cent during the corresponding month of the previous year.

Among the major segments, manufacturing production grew by 1.6 per cent from (-) 0.3 per cent reported for the corresponding month of 2019.

Similarly, electricity generation grew by 5.1 per cent from (-) 0.1 per cent during December 2019.

However, mining output de-grew (-) 4.8 per cent on a YoY basis from 5.7 per cent in the corresponding month of the previous year.

Furthermore, the data on a YoY basis showed that manufacturing of primary goods de-grew by (-) 0.3 per cent, whereas capital goods production rose by 6 per cent, and intermediate goods inched higher by 0.4 per cent.

On the other hand, the production of infrastructure or construction goods grew by 0.9 per cent and consumer durables by 4.9 per cent.

The sub-segment of consumer non-durables showed a growth of 2 per cent.

“Even as many lead indicators have displayed a robust pace of expansion in the recent months, the subdued 1 per cent growth of the IIP in Q3 FY2021, suggests that the recovery in the broader economy remains relatively measured,” said ICRA’s Principal Economist Aditi Nayar.

“As anticipated, the base-effect led contraction in the IIP in November 2020 proved to be fleeting.”

Sunil Kumar Sinha, Principal Economist, India Ratings and Research, said: “The December data once again reinforces the view that the uptick witnessed in the month of September and October was due to a combination of festive and pent demand and the recovery is still fragile and the ongoing recovery needs sustained policy support.”

“However, the positive aspect of the December 2020 factory output is that it has now crossed the pre-Covid level that is the level of output witnessed in February 2020.”