Given the exceptional circumstances, however, the government has highlighted that any comparision with the (year-on-year) growth rates for earlier months would be inappropriate.
The index of industrial production (IIP) shrank 16.6% in June, against a 33.9% contraction in May, as lockdown curbs were substantially lifted, facilitating a partial resumption of manufacturing. The contraction in output narrowed from a record 57.6% in April. Given the exceptional circumstances, however, the government has highlighted that any comparision with the (year-on-year) growth rates for earlier months would be inappropriate.
Analysts say the IIP will likely recover substantially in July, thanks to a graded pick-up in manufacturing, as the lockdown restrictions were substantially eased and many migrant labourers were back. However, a sustained recovery is still away, they say.
Not surprisingly, capital goods output shrank for 18 months in a row, while consumer durables saw a 13th straight month of fall in June. Of course, the level of contraction narrowed from the previous month. While consumer durables dropped by 35.5% in June, capital goods saw a 36.9% drop. However, consumer non-durables rose (14%) in June for the first time since November 2019, thanks to the easing of curbs on the supply of essential items.
Manufacturing contracted 17.1% in June, against a 38.4% fall in May, while mining dropped by 19.8%, against a 20.5% decline in the previous month. Electricity contracted by 10% in June, compared with a 14.9% fall in May.
Aditi Nayar, principal economist at Icra, said the turnaround in consumer non-durables is likely to have been “driven by the rebuilding of inventories that were depleted during the lockdown months, and may not sustain at such high levels after the restocking is completed”.
“The pace of contraction of various lead indicators, such as the output of Coal India, electricity consumption and GST e-way bills narrowed to single-digits in July, which suggests that the de-growth in the IIP would also shrink in that month,” Nayar said. However, she cautioned that pent-up demand contributed to the improved performance of certain categories of manufacturing in June-July, which may not sustain in August, especially due to the extension of localised lockdowns in various states.