Latest industrial production statistics released by the Central government point to a sharp deceleration of industrial activity, albeit on expected lines.
The latest Index of Industrial Production (IIP) release by Ministry of Statistics & Programme Implementation (MOSPI) carries “quick estimates” of industrial production pertaining to April 2020.
As much of the industrial sector was under the COVID19-induced lockdown, the IIP figures are highly abnormal. As such, comparing the April 2020 figures with previous ones will not be a meaningful exercise. This is also indicated by MOSPI in the note, and the IIP release refrains from showing year-on-year growth figures for April 2020, as the comparison would be made with a severely abnormal situation on the one hand and a fairly normal one on the other.
The overall IIP is grouped in two ways. The first is the sectoral breakup where the overall IIP is fragmented into three categories – mining (14.37 per cent), manufacturing (77.63 per cent) and electricity (7.99 per cent). The percentages correspond to the respective “weights” of the categories in the overall IIP. These “weights” ultimately measure the relative value addition in that segment with respect to that in the overall industrial sector.
The second group is known as the “use-based” classification where all items that go into the computation of the overall IIP are regrouped under six heads – primary goods (34.05 per cent), capital goods (8.22 per cent), intermediate goods (17.22 per cent), infrastructure/construction goods (12.34 per cent), consumer durables (12.84 per cent) and consumer non-durables (15.33 per cent).
The IIP figures for April 2020 are at abysmal levels – overall (56.3); mining (78.3); manufacturing (45.1) and electricity (126.1). Seen from the use-based classification, the IIP figures for April 2020 are: primary goods (92.3); capital goods (7.7); intermediate goods (42.0); infrastructure goods (21.7); consumer durables (5.5) and consumer non-durables (89.4). It may be noted that the base year for IIP calculation is 2011-12.
Though the April 2020 numbers are not amenable to interpretation due to the inherent abnormality, it can be seen that only electricity has a level over 100. This means that only this sector showed production that was higher than that in the base year. We can also see that primary goods and consumer non-durables had relatively higher levels. This can be explained by the fact that “essential services” that were exempted from the lockdown fall under one of the three sectors – electricity, primary goods or consumer non-durables.
Performance in FY20
Overall industrial production declined by 0.9 per cent during FY20 (April 2019 to March 2020). Once again, this was due to the steep fall in March 2020, thanks to the lockdown situation. In March 2020, the overall IIP fell by a staggering 18.3 per cent. One should also bear in mind that this fall came about despite the fact that not the entire month of March 2020 was lockdown-affected. Industrial production was chugging along well during the last quarter (January to March) of FY20. In January 2020, industrial production had expanded by 2.2 per cent followed by a healthier 4.2 per cent in February 2020. In fact, till February 2020, the cumulative growth in industrial production was close to 1 per cent. The 18.3 per cent fall in March 2020 dragged down growth to such an extent that overall industrial growth in FY2o indeed turned negative. In FY19, industrial production was up 3.8 per cent.
The electricity sector did not have a pleasant time in FY20. Including the expected decline in March 2020, the year-on-year growth rates in monthly electricity generation were down in six of the twelve months of FY20. The year closed with a modest 1 per cent growth in electricity generation, making a pale comparison with the healthy 5.2 per cent rise in FY19.
Featured chart sourced from Ministry of Statistics & Programme Implementation. The chart and values relate to overall index of industrial production (IIP) for the years FY18, FY19 and FY20. * indicates provisional figures for FY20.
