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Factory output rises to eight-month high on manufacturing, electricity boost

Factory output had contracted by 6.6 per cent in October 2019. Cumulatively, factory output for April-October has shrunk by 17.5 per cent as against 0.1 per cent growth in the year-ago period.

By: ENS Economic Bureau | New Delhi | December 12, 2020 2:06:53 am
Manufacturing output recorded growth of 3.5 per cent in October as against a 5.7 per cent contraction last year. (Representational)

Factory output growth rose to an eight-month high of 3.6 per cent in October, mainly due to a low base effect, along with improvement in manufacturing and electricity output, data released by the National Statistical Office (NSO) showed. The Index of Industrial Production (IIP) in October recorded a sequential improvement from 0.5 per cent in the previous month, making it the second consecutive month of factory output being in the positive territory.

Factory output had contracted by 6.6 per cent in October 2019. Cumulatively, factory output for April-October has shrunk by 17.5 per cent as against 0.1 per cent growth in the year-ago period.

Explained

Nearing pre-Covid levels

A low base effect, along with pent-up and festive demand, as well as gradual opening of the economy post the lockdown led to growth in October IIP. Moreover, manufacturing activities are gradually reaching pre-Covid levels.

Manufacturing output recorded growth of 3.5 per cent in October as against a 5.7 per cent contraction last year, while electricity output grew 11.2 per cent in the month against a 12.2 per cent contraction last year. Mining sector contracted by 1.5 per cent, while consumer durables and non-durables output grew by 17.6 per cent and 7.5 per cent, respectively.

Economists said base effect, pent up and festive demand along with gradual opening up of the economy supported the October IIP growth. Sunil Sinha, principal economist, India Ratings said, “Manufacturing activities are gradually reaching the pre-Covid level and are now just 2.6 per cent lower than the February 2020 level. Electricity generation has already surpassed pre-Covid level and is now 5.5% higher but mining activities are lagging and is even now 20.5% lower than February 2020 level. Capital goods growth in October 2020 turned positive after a gap of 21 months, though is still 6% lower than pre-Covid level. Only the consumer durable sector has surpassed pre-Covid level production.”

He, however, said that the continued contraction of primary goods and marginal growth of intermediate goods suggest that current recovery is uneven.

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