The Index of Industrial Production (IIP) for November 2021 rose by only 1.4 percent from a rise of over 4 percent reported for October 2021. However, the production rate was higher on a year-on-year basis. In November 2020, the IIP had declined by (-)1.6 per cent.
India's industrial production growth remained subdued for the third straight month mainly due to the waning low base effect, while the mining sector showed good performance.
The manufacturing sector, which constitutes 77.63 percent of the Index of Industrial Production (IIP), grew 0.9 per cent in November, according to data released by the National Statistical Office (NSO) on Wednesday.
The mining sector output rose five percent in November, while power generation increased 2.1 per cent.
The factory output recorded double-digit growth in the four months from May to August this fiscal. Then it slipped to 3.3 percent in September this fiscal and recorded a growth of four per cent, mainly due to waning low base effect.
In November 2021, the IIP stood at 128.5 points compared to 126.7 points in the same month in 2020. The index stood at 128.8 points in November 2019, as per the NSO data.
Thus, the data showed fading of the low base effect. The IIP growth witnessed double-digit growth from May onwards this year on the back of the lower base effect.
The IIP had contracted by 1.6 percent in November 2020.
During April-November this year, the IIP grew 17.4 percent against a 15.3 percent contraction in the same period last year.
The data showed that industrial production recovered in September 2020 and surpassed the pre-pandemic level of September 2019. The IIP had grown by one per cent in September 2020.
Industrial production plunged 18.7 percent in March last year following the COVID outbreak and remained in the negative zone till August 2020.
With the resumption of economic activities, factory output rose 1 per cent in September 2020 and 4.5 percent in October 2020. In November 2020, it fell 1.6 percent and then entered the positive territory with a 2.2 percent growth in December 2020.
The IIP had recorded a contraction of 0.6 percent and 3.2 percent in January 2021 and February 2021, respectively. In March 2021, it grew 24.2 percent.
For April 2021, the NSO held back the release of complete IIP data.
In May 2021, the IIP rose 27.6 percent, and in June, it grew 13.8 percent.
The factory output grew 11.5 percent in July 2021 and 13 percent in August.
The second wave of the pandemic started in the middle of April 2021, and many states imposed restrictions to curb the spread of coronavirus infections.
''The growth rates over the corresponding period of the previous year are to be interpreted considering the unusual circumstances on account of COVID 19 pandemic since March 2020,'' the NSO said in the statement.
The government had imposed a nationwide lockdown to contain the spread of coronavirus infections on March 25, 2020.
The manufacturing sector had recorded a contraction of 1.6 per cent in November 2020. The mining sector output shrank 5.4 percent in the same month.
The electricity generation had grown by 3.5 percent in November 2020.
The output of capital goods, which is a barometer of investment, contracted by 3.7 percent in November 2021. It had witnessed a contraction of 7.5 percent in the year-ago period.
Consumer durables manufacturing shrank 5.6 percent in the month under review against a decline of 3.2 percent in November 2020.
Consumer non-durable goods production grew 0.8 percent in November 2021 against a 0.7 percent contraction in the year-ago period.
Experts weigh in
Aditi Nayar, Chief Economist, ICRA
The IIP displayed an expected moderation to a feeble nine-month low growth of 1.4 percent in November 2021, with the impact of the slackening momentum after the festive season compounded by the disruption caused by heavy rains in South India, amid the continuing issues afflicting the auto sector. The dip in industrial growth was broad-based across the three sectors and six categories, with capital goods and consumer durables displaying an even deeper YoY contraction in November 2021.
Discouragingly, mining and manufacturing output slipped below the pre-covid level in November 2021, with the latter led by capital goods and consumer durables, in line with the MPC's prescient view that the economic recovery had not attained durability.
Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India
The deceleration in IIP growth number for November 2021 is definitely a cause of concern. On a sequential basis, the Index of Industrial production has fallen by around 4 percent when compared to the previous month. There has been specifically very sharp fall on a sequential basis (MoM) in the consumer durables segment. As indicated by some of the other economic indicators also, the growth momentum in the month of November seems to be flattening. Going forward, in the next few months we could see further weakening of the growth momentum as the economy grapples with Omicron concerns and supply disruptions. The latest economic indicators are pointing towards urgent need of demand stimulation measures to sustain the economic recovery. In the upcoming Union Budget, the Government should look at measures to boost private consumption, which can be the bellwether of India’s economic recover
