On expected lines, the low base effect of April 2020 — when the entire country was in lockdown — played a crucial role in the eight core industries’ output recording a 56 per cent jump year-on-year in April 2021.
The right way to assess their performance — even according to the government — is to look at it sequentially; the eight core industries recorded a 15.1 per cent contraction in April 2021 compared to March 2021. This is a clear pointer to how the second Covid-19 wave had impacted industrial performance. In March 2021, the industries catapulted to a 32-month high of 6.8 per cent.
“This high growth rate in April 2021 is largely due to the low index base in April 2020 consequent to the low industrial production across all sectors by the lockdown imposed to contain the spread of Covid-19 last year. The month-over-month production of eight core industries, as captured by the index of core industries, declined 15.1 per cent in April 2021 compared to 15.8 per cent growth in March 2021 due to emergence of the Covid-19 wave,” an official release said.
Growth contraction
Meanwhile, the government has pegged the growth contraction of the eight core industries — coal, crude oil, natural gas, fertilisers, steel, cement, steel and electricity — for fiscal 2020-21 at 6.5 per cent as against the estimated contraction of 7 per cent.
Devendra Pant, Chief Economist at India Ratings said data on core infrastructure industries is the first set of information for FY22 with regional/localised lockdowns. “April 2021 growth is high due to a weak base. However, this data suggests that while all states have individually implemented lockdowns, they were not as stringent as the nationwide lockdowns of April and May 2020,” he said. All sectors except crude oil registered positive growth in April 2021, Pant added. “Even IIP growth in April 2021 is likely to be strong due to weak base in April 2020. However, weak demand conditions are unlikely to keep this growth momentum strong in coming months,” he said.
PMI more relevant
Madan Sabnavis, Chief Economist at CARE Ratings, said that growth numbers pertaining to industry would tend to be exaggerated as activity had closed down virtually in April and May 2020. Therefore, growth rate of 56.1 per cent does not come as a surprise. “One may be confused by this number as this was also the month when we had lockdowns in various parts of the country. Therefore, we need to see growth over March which was -15.1 per cent, meaning that there is no reason to sit back and feel satisfied. The PMI numbers that come out will be more relevant,” Sabnavis said.
Aditi Nayar, Chief Economist at ICRA, said that as expected, the low base of the nationwide lockdown pushed up the core sector expansion to 56 per cent in April 2021, a shade lower than ICRA’s forecast of around 60 per cent .
“We expect the IIP to record a transient spike to a 130-150 per cent expansion in April 2021, followed by a moderation in May 2021 in line with the proliferation in State-wise restrictions,” she said.