India’s industrial output rose in October for the second consecutive month after six months of contraction with manufacturing and electricity pushing overall industrial growth to 3.6 per cent, the highest in the current fiscal year so far.
Industry has a share of around 29 per cent in GDP (Gross Domestic Product). Experts attribute the healthy industrial growth numbers to festival demand. Though the government expects the positive trend to continue, some observers are still cautious.
Industrial growth, as indicated by the Index of Industrial Production (IIP), was 0.4 per cent in September. However, there was a contraction of 6.6 per cent during October 2019.
According to the data released by the Statistics Ministry, manufacturing registered a growth rate of 3.5 per cent in October against a contraction of 0.2 per cent in September and 5.7 per cent in October 2019. The good performance of manufacturing showed its impact on electricity generation as its growth rate touched 11.2 per cent in October as against growth of 4.85 per cent in September.
Good news on jobs front
The growth in manufacturing is good news on the employment front as it is expected to provide the maximum number of jobs. It is believed that if it provides one direct job, then four indirect jobs get generated. The Statistics Ministry said the number could be revised. Along with the Quick Estimates of IIP for October 2020, the indices for September have undergone the first revision and those for July 2020 the final revision in the light of the updated data received from the source agencies. The Quick Estimates for October, the first revision for September and the final revision for July have been compiled at weighted response rates of 90 per cent, 94 per cent and 95 per cent, respectively, it said.
Sunil Sinha, Principal Economist with India Ratings, said base effect, pent-up/festival demand and gradual normalisation of economy all helped the October IIP. Manufacturing activity is gradually reaching the pre-Covid level and is just a tad below February levels. Electricity generation has already surpassed pre-Covid levels and is now 5.5 per cent higher but mining activities are lagging and are even now 20.5 per cent lower than February levels.