Factory output rises 7.1% to 8-month high
NEW DELHI: Index of Industrial Production (IIP), a measure of factory output, grew at 7.1% on an annual basis in the month of April, according to data released by the National Statistical Office (NSO) on June 10.
This is the highest IIP growth in last eight months and a significant improvement from the 2.2% number in the month of March. However, a disaggregated analysis of the numbers shows that while there is a clear economic recovery underway, it is still not broad-based.
In absolute terms, IIP for April 2022 stands at 135.1. This is higher than the pre-pandemic level of April 2019 at 126.5. IIP had crashed to just 54 in April 2020, a result of the complete lockdown which was imposed on March 25, 2022. At 126.1 in April 2021, IIP had pretty much attained its prepandemic value last year itself, despite the disruption caused by the second wave of the Covid-19 pandemic. So there is not much in terms of base effect in the latest annual growth reading.
However, a look at use-based classification data of the IIP shows that the pre-pandemic levels still elude consumer goods and capital goods categories of the index. Even on a year-on-year basis, consumer goods category shows the lowest growth in the April 2022 numbers.
Experts see this as signs of continuing weakness in consumer demand.
“The paltry year on year growth in the consumer nondurables also alludes to the K shaped recovery whereby households falling in the lower end of the pyramid are finding their real income being eroded disproportionately by the high inflation,” said a note by Sunil Kumar Sinha, Principal Economist, India Ratings and Research. To be sure, things are expected to improve going forward.
“As the economic activities normalise further, the capital and infrastructure goods may also get impetus due to the ongoing capex by the union and state government. Overall, India Ratings and Research expects IIP to come in high single digits in May 2022,” Sinha added in his note.