Factory output growth rises to 8-mth high of 3.6% in Oct

Factory output growth rises to 8-mth high of 3.6% in Oct

NEW DELHI: The country’s industrial output growth rose for the second successive month to an eight-month high in October, bolstered by festive demand and led by a turnaround in manufacturing, electricity, consumer durables sectors. This is the latest in a spate of encouraging data pointing to a recovery after the lockdown took a heavy toll on the economy.
Data released by the National Statistical Office (NSO) on Friday showed the index of industrial production (IIP) rose an annual 3.6% in October, higher than the upwardly revised 0.5% in September and a contraction of 6.6% in October 2019.
During the April-October period, IIP contracted 17.5% compared with an expansion of 0.1% in the same year-earlier period, highlighting that the recovery needs to add strength.
The manufacturing sector, which had borne the brunt of the impact of the lockdown, rose an annual 3.5% in October, compared with a contraction of 5.7% in the year earlier period while the electricity sector rose 11.2% compared with a decline of 12.2% in October 2019.
Experts cautious about sustainability of recovery
Led by festival demand, both the consumer durables and non-durables sectors posted robust expansion rising by 17.6% and 7.5% in October. The capital goods sector returned to the positive zone after 21 months, rising an annual 3.3% in October compared with a 22.4% contraction in the yearearlier month. The PMI manufacturing survey has also pointed to a recovery in the manufacturing sector although some segments display some stress.
The sector had contracted for six consecutive months since March with April posting a record decline of 57.6%. But since May the contraction has narrowed as economic activity gathered momentum after the lifting of the lockdown in phases. Latest data has also shown that the economy contracted 7.5% in the September quarter, sharply shallower than the record 23.9% decline in the June quarter.
“.. The varied dimensions of recovery in industrial activity is progressing with support from rural economy, pent-up demand, and support from accommodative fiscal-monetary policy. This support framework is expected to continue in the remaining part of FY21, which would also see a favorable statistical base effect compared to H1 (months of Oct and Mar have the maximum support from a favorable statistical base),” said Shubhada Rao economist and founder of QuantEco research.
“Having said so, we also acknowledge that there could be few factors that could potentially weigh on industrial activity,” said Rao, adding that the possibility of any lockdowns in the US and Eruope to counter the fresh wave of Covid-19 infections could hurt export demand. But most economists urged caution saying the months ahead could be crucial to sustaining the recovery.
“A variety of available indicators such as output of coal, electricity, non-oil exports and GST eway bills have revealed that the pace of growth flagged in November 2020, on account of a combination of an unfavourable base effect, fewer working days related to the shift in the festive calendar, as well as some slack after the satiation of pent-up demand,” said Aditi Nayar, principal economist at ratings agency ICRA. “Based on the available information, we anticipate a slide in IIP growth in November 2020. Moreover, a slippage back into a mild contraction in November 2020, cannot be ruled out at this point,” said Nayar.

Source From : Times Of India

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