Industrial production expands after brief contraction

Sri Lanka’s manufacturing firepower, measured by the industrial production, expanded in December as industrialists added more muscle into their factories and production lines to make up for the lost output when restrictions were re-imposed since October due to the pandemic.

According to the Index of Industrial Production (IIP), data released by the Department of Census Statistics, the index has expanded by 2.0 percent in December to 110.7 index points from 108.5 index points in the same month in 2019, after the index slipped to 106.9 points in November 2020.

The industrial production in Sri Lanka got off to a robust start since virus related restrictions were lifted in mid-may and the index reached a pre-pandemic high of 111.1 in July, the data showed.

In April, the IIP hit a nadir of 49.7 as industrial activities categorised as essential services such as pharmaceutical, exports and food and beverages were the only sectors functioning at speed at the time broad based restrictions on other economic activities were imposed.

However, Sri Lanka soon realised that country-wide lockdowns were counterproductive in containing the pandemic and the economic toll of such action greatly outweigh the virus’s toll itself.

The authorities hence took a measured approach in response to the virus since October, isolating only the high risk areas, containing the potential of the virus to spread into other areas.

Amid these restrictions, the government ensured that production continued unabated even in the areas designated as isolated.

Among the key sectors which powered the industrial heft during December were beverages, food products, industry identified as other non-metallic mineral products and, coke and refined petroleum products.

Sri Lanka, under its domestic production skewed economic policy, is on course for the revival of its lost industrial base in the late 1970s with an emphasis on rebuilding the heavy-duty industries - both State-owned and private sector.

A few of such industries, which received a new lease of life during the last couple of months, were the production of sugar, paper, tyre and handloom.

Meanwhile, industries such as wearing apparel declined in December compared to the same month in 2019 due to the slowdown in orders for the routine wearing apparels from Sri Lanka’s key customers in the West and the Europe due to lockdowns in those markets.

Among the other sectors which saw some declaration in December were rubber and plastic products and chemical and chemical products.

Sri Lanka has a vast potential to rebuild a robust production base under the alternative economic policy espoused and pursued by the current government, but the key to that remains the policy continuity for at least 5 years without derailment.