Factory output shrank at a lower pace in May

IIP IN MAY SHRANK BY 34.7% COMPARED TO 57.6% IN APRIL, AS PER DATA PROVIDED BY CSO

NEW DELHI: India’s factory output shrank sharply for the third straight month in May, though at a lower pace than in April, signalling the severe impact of the nationwide lockdown on production processes. Data released by the Central Statistical Organisation (CSO) on Friday showed the index of industrial production (IIP) in May contracted by 34.7% against 57.6% in April.

Recent leading indicators for June have signalled a quicker normalisation of economic activity, coinciding with the relaxation of lockdown restrictions on June 1, but the latest surge in Covid-19 cases and renewed curbs may delay the recovery. June output declined across sectors, with manufacturing, mining and electricity contracting 39.3%, 21% and 15.4% respectively. Within manufacturing, except pharmaceuticals, all sectors showed negative growth, including food products. All sectors according to use-based classification also showed the same trend, including consumer goods sector which dipped 68.5% in May, even as consumer non-durables narrowed the contraction to 11.7%. “Quite clearly, the lockdown and limited opening up affected production of all industries. Different state rules on transport and labour further exacerbated the situation. While non-essential goods were permitted for production, challenges remained in logistics and labour,” said Care Ratings chief economist Madan Sabnavis.

Both manufacturing and services PMI showed significant improvement in June over May, though still in contraction zone, signalling a pick-up in economic activity.