Factory output rose to a seven-month high of 4.5 per cent in February from 0.2 per cent a year ago, primarily due to a low base effect and pickup in mining and electricity output. Capital goods and consumer durables output continued to contract, indicating weak investment and consumption demand, data released by National Statistical Office (NSO) on Thursday showed.
Cumulatively, the growth of Index of Industrial Production (IIP) remained subdued at 0.9 per cent for the 11 months of April-February, as against 4.0 per cent growth in the year-ago period. The COVID-19 outbreak is expected to adversely impact industrial growth in the coming months.
Manufacturing sector, which carries a weight of 77.63 per cent in the IIP, grew 3.2 per cent in February, gaining from the low base last year. The sector had recorded a contraction of 0.3 per cent in the corresponding period of last year, the data showed.
For April-February, manufacturing sector has grown a meagre 0.6 per cent as against 3.9 per cent growth last year. Capital goods output, a measure of investment demand, has contracted in each of the eleven months this fiscal, declining 9.7 per cent in February compared to 9.3 per cent contraction last year. Cumulatively, capital goods output has contracted by 11.4 per cent in April-February from 4.1 per cent growth last year.
Consumer durables output posted a contraction of 6.4 per cent in February as against a growth of 0.9 per cent a year ago.
The industry group ‘Manufacture of basic metals’ recorded the highest growth of 18.2 per cent, followed by 8.0 per cent in ‘Manufacture of chemicals and chemical products’ and in ‘Manufacture of other non-metallic mineral products’. ‘Manufacture of motor vehicles, trailers and semi-trailers’ recorded the highest contraction of 15.6 per cent, followed by (-)14.8 per cent in ‘Manufacture of computer, electronic and optical products’ and (-)9.9 per cent in ‘Manufacture of fabricated metal products, except machinery and equipment’.
Economists said the shutdown in March is likely to reverse the growth trend of industrial output. “Going forward, we will see a reversal of trend in March due to the shutdown and the March-end phenomenon of companies pushing production to meet targets will not hold. For the year, production could be in the range of 1-1.5% at best,” Madan Sabnavis, chief economist, CARE Ratings said.
Rajani Sinha, chief economist, Knight Frank India, said, “There is not much to cheer from this data as IIP growth is likely to sharply fall going forward … Even after the lockdown is lifted, demand for consumer discretionary items will take time to recover given the poor consumer sentiments in midst of job losses and pay cuts. Capital goods demand will also remain weak as businesses will be wary of capex in these uncertain times.”
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