Industrial activities showed improvement in June, but still remained in contraction zone.

According to latest government data, the contraction has narrowed down to 16.6 per cent in June against indicative headline number of 33.89 per cent in May and 57.62 per cent in April.

For the three months (April-June) period the rate is nearly 36 per cent.

For the first time after March, the Statistics Ministry has come out with a headline number showing a contraction of nearly 20 per cent in mining, over 17 per cent in manufacturing and 10 per cent in electricity.

These three sectors registered contraction of 22.4 per cent, 40.7 per cent and 15.8 per cent respectively in the April-June period.

According to Aditi Nayar, Principal Economist at ICRA Ltd, the pace of contraction of various lead indicators, such as the output of Coal India Limited, electricity consumption and GST e-way bills narrowed to single-digits in July 2020, which suggests that the de-growth in the IIP would also shrink in that month.

Nevertheless, we continue to caution that pent-up demand contributed to the improved performance of certain categories of manufacturing in June-July 2020, which may not sustain in August 2020 especially in light of the extension of localised lockdowns in various States

Anil K Sood, Co-Founder of the Institute for Advanced Studies in Complex Choices, feels that the labour intensive manufacturing sectors like textiles and apparels, machinery, motor vehicles and transportation don’t show much sign of recovery — these sectors constitute nearly 15 per cent of the index weight and the production is below 60 per cent of level achieved during June last year.

“A lack of growth in labour intensive sectors will have an adverse impact of demand going forward,” he said.