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- ‘Great Recovery’ In Industrial Production In April, The Base Weakened By Kovid Is Giving Better Figures
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The Index of Industrial Production (IIP) jumped 134.4% year-on-year in April. The index reached 126.6 in the first month of this financial year. The biggest reason for this has been the weak base created in the year 2020 due to Kovid. The IIP rate tells how much the manufacturing sector has contributed to the industrial output. This helps in estimating the quarterly GDP and forecasting the coming quarters.
IIP had declined by 57.3% in April last year due to the lockdown.
The industrial production figures for April this year are looking spectacular in themselves, but according to government officials and analysts, there is no need to get excited about it. Actually, to prevent the spread of Kovid-19, a lockdown was imposed in the last days of March last year. Due to this there was a sharp decline of 57.3% in industrial production then.
It is not right to compare the IIP of April 2020 with the very weak figures
Anyway, how much has been the index of industrial production in April this year, only these figures have been released by the government. It has not said anything about the increase in the rate of industrial production on a year-on-year basis. This is because it is not right to compare this year with the very weak figures of IIP of April 2020.
The index reached 126.6 in April 2021, up from 126.5 in April 2019
But the matter of relief is that in April 2019 (the year before Kovid) it was 126.5 as against 126.6 figure of IIP of April this year. Comparing this year with the previous year in the year when Kovid wreaked havoc gives a slightly better idea about the IIP.
IIP growth data for March revised from 22.4% to 24.1%
The second big thing is that the government has revised the IIP growth figure for March this year to 24.1%. Before the revision, the figure stood at 22.4%. In January also, the actual position of IIP has also improved after the revision. This has been revised from -0.9% to -0.6%.
Production of capital goods, consumer durables, infra goods less than two years ago
If we talk about the economic sectors included in IIP, then in April this year, the production of capital goods, consumer durables and infrastructure goods has been less than two years ago. However, there has been an increase in the production of consumer non-durable, primary goods and intermediate goods.
Which items from which economic sector are there in IIP?
Capital goods include machinery items, while consumer durables include clothing, passenger vehicles, etc. Infrastructure goods include paint, cement, cables, bricks, tiles, rail materials, etc. Consumer non-durables include food items, medicines, etc., while primary goods include mining, electricity, fuel and fertilizers. Intermediate goods include threads, chemicals, semi-finished steel items, etc.
Recovery in the economy on, but meaningful growth rate will be achieved in the next financial year
Sunil Sinha, Principal Economist, India Ratings, said that industrial production stood at 94.3% in April 2021 as compared to what it was in February 2020 (shortly before the outbreak of Kovid). He also said that if it is compared with the IIP data of April 2019, then the figure will look marginally better. According to Sinha, it is clear that the economy is on the path of recovery, but meaningful economic growth rate will be achieved in the next financial year, not in this financial year.
IIP growth may be less than 20% in May, conditions will be better in June-July
Aditi Nair, chief economist of rating agency Icra, says that IIP growth may remain below 20% in May. The benefit of base effect will be less, as the weakness in IIP rate last year was reduced on a monthly basis. Industrial production was also affected by the second wave of Kovid and the increase in restrictions in the states. According to Nair, many other economic figures can be better on a monthly basis in June-July due to reduction in cases of Kovid infection and unlocking in several phases.