Jolting restoration hopes, India’s industrial manufacturing slipped again into contractionary territory in January due to the dismal efficiency of shopper items, capital items and mining sectors, the official knowledge confirmed on Friday.
The Index of Industrial Production (IIP) declined by 1.6 per cent in January on a year-on-year (YoY) foundation, as in opposition to 1.56 per cent development within the earlier month, based on the information launched by the Nationwide Statistical Workplace. The December quantity noticed a slight upward revision from the 1 per cent estimates earlier.
Industrial exercise has posted development in solely three months within the present monetary yr to date. The IIP had turned constructive in September after a niche of six months on the again of the competition season demand. Nevertheless, an increase in Covid instances and the re-imposition of lockdown in a number of cities pose upside dangers to the nation’s development outlook.
“Whereas we had anticipated deterioration within the IIP’s efficiency in January 2021, we didn’t count on it to revert to contraction. After a speedy restoration seen until October 2020, the pattern within the IIP has turned risky within the final three months, suggesting that the economic system has entered right into a consolidation part with an underlying momentum that’s comparatively subdued,” stated Aditi Nayar, principal economist, ICRA Rankings, including, “The IIP could proceed to contract in February.”
Manufacturing sector exercise contracted by 2 per cent in January, in contrast with 2.1 per cent development within the earlier month, led by a pointy decline within the shopper non-durables sub-sector.
Shopper non-durables, comprising important items with a broadly non-elastic demand, contracted by 6.8 per cent in January, as in opposition to a 0.6 per cent decline a yr in the past. Shopper durables, comprising primarily white items and cellphones, noticed 0.2 per cent contraction, as in opposition to 5.7 per cent development in December and three.7 per cent contraction final yr.
“We stay circumspect relating to the depth of the rebound in consumption instantly after the vaccine roll-out widens, as some classes of households could select to rebuild the financial savings that that they had drained in the course of the lockdown and post-lockdown interval,” stated Nayar.
Madan Sabnavis, chief economist, CARE Rankings, stated the damaging development in shopper items was a significant disappointment, “which was anticipated to be constructive and therefore is the shock issue for us”. The pent-up demand story has fairly clearly paused as seen by these numbers, stated Sabnavis, including that he anticipated development to be damaging in February however would flip constructive in March as development final yr was down by 18 per cent.
The manufacturing class makes up 77 per cent of the index.
The capital items sector contracted by 9.6 per cent, regardless of a really low base of 4.4 per cent contraction in January final yr. Whereas the mining sector posted 3.7 per cent contraction in the course of the month, electrical energy grew by 5.5 per cent, indicating a pick-up in demand from factories.
The IIP data is launched with a lag of six weeks and compiled with knowledge obtained from 16 supply companies, which, in flip, obtain knowledge from the manufacturing factories and institutions.
Of the 24 sub-sectors, solely six sectors posted development in January, with chemical substances and chemical merchandise rising by 3.1 per cent, rubber and plastic merchandise by 6.3 per cent, and wooden merchandise aside from furnishings by 6.9 per cent. Carrying attire, prescription drugs, and furnishings sub-sectors noticed contraction of 20.2 per cent, 11.5 per cent, and 18 per cent, respectively.
Weak development and inflationary stress in non-food articles could drive the financial coverage committee of the Reserve Financial institution of India to stay accommodative. In the course of the MPC assembly held in February, the RBI had left coverage charges unchanged.