Sequentially, industrial output grew 7.2% in July over June, though year-on-year growth was lower than 13.6% in the previous month due to the waning base effect. The index of industrial production (IIP) for July at 131.4 was down only 0.3% from 131.8 in July 2019. The index had plummeted to 117.9 in July 2020 with the economy in the grip of the first wave of the pandemic.
Five of the six sub-indices–primary goods, capital goods, intermediate goods, infrastructure/ construction goods, consumer non-durables–recovered to the pre-Covid mark in July 2021, pointing to the strength of the recovery. Only the consumer durables index was still below July 2019 levels.
“Relative control over the virus outbreak, strong external demand and an easing of the curbs on movement paved the way for industrial growth normalisation,” said Rahul Bajoria, chief India economist, Barclays.
ICRA chief economist Aditi Nayar said, “Notably, the manufacturing index in July 2021 (130.9) was nearly as high as the level in October 2020 (132.0) during last year’s festive season, which offers a glimpse into the strength of the revival after the second wave.”
Mining Grew 19.5% YoY
CARE Ratings said the consistent capital expenditure push by the government had lifted sentiment.
India’s economy grew 20.1% in the June quarter, helped by the low base of last year. In its monthly report for August released on Friday, the finance ministry said India is poised for even faster recovery and stronger growth.
Broad-based growth
The year-on-year pick-up in industrial output was led by mining, which grew 19.5% while manufacturing rose 10.5% and electricity generation was up 11.1%.
Capital goods output, an indicator of investment, rose 29.5% in July while consumer durables, an indicator of urban demand, grew 20.2%. However, consumer non-durables output shrank 1.8% on year.
As per the data, 20 of the 23 sub-sectors within manufacturing posted year-on-year growth. “All sectors witnessed a y-o-y improvement in July 2021 growth due to a combination of the lockdown being withdrawn in most of these sectors as well as the base effect,” CARE Ratings said.
The upcoming festival season is expected to further strengthen recovery.
ICRA expects industrial growth to have improved to 13-15% in August.
