Industrial growth based on Index of Industrial Production (IIP) recorded a growth of 11.5 per cent in July, data released by National Statistical Organisation (NSO) on Friday showed. Although low base did make an impact, but at the same time manufacturing, mining and power sectors also showed good performance.

The IIP had contracted by 10.5 per cent in July 2020.

“The growth rates over corresponding period of previous year are to be interpreted considering the unusual circumstances on account of Covid 19 pandemic since March 2020,” NSO said.

Core sector output grows 9.4 per cent in July

The manufacturing sector, which constitutes 77.63 per cent of the IIP, grew 10.5 per cent in July. The mining sector output rose 19.5 per cent in July while power generation increased 11.1 per cent. The data showed that industrial production recovered but was still slightly below the pre-pandemic level of July 2019.

Industrial production plunged 18.7 per cent in March last year following the Covid outbreak and remained in the negative zone till August 2020. With the resumption of economic activities, factory output rose 1 per cent in September 2020 and grew 4.5 per cent in October. In November 2020, the factory output fell 1.6 per cent and then entered the positive territory with a 2.2 per cent growth in December 2020.

PMI for Manufacturing back in expansion mode in July at 55.3

According to Aditi Nayar, Chief Economist with ICRA, in sequential terms, manufacturing output rose by 8.2 per cent in July 2021, much lower than the corresponding 17 per cent change in the generation of GST e way bills. “We believe the latter represents continued inventory clearance as the state-wise restrictions eased. Subsequently, the GST e way bills have remained flat in August 2021 at the previous month's level, which may be on account of a stabilisation in dispatches rather than a signal that the growth momentum is plateauing,” she said.

Further, she expects the considerable 25 per cent shortfall in rainfall relative to the long period average to boost the performance of mining and infrastructure/construction in August this year, given the extended window for such activities. Moreover, the requirement to use electricity to draw ground water for irrigation has resulted in a spike in the electricity demand to 17 per cent in that month, which has fallen sharply to under 5 per cent in September amid abundant rains. However, a contraction in motorcycle production has pulled down the auto sector's performance in August.

“With an expected uptick in mining, electricity and infrastructure/construction goods, amidst a weaker performance of the auto sector, we project the IIP growth to improve to 13-15 per cent in August,” she said.

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