India’s factory output accelerated 7.2% in July over the preceding month, benefiting from easing pandemic restrictions and rising mobility even as fading of the low base meant year-on-year growth eased to 11.5% during the month.
In June, the Index of Industrial Production (IIP) grew 5.7% month-on-month and 13.6% year-on-year.
Data released by the statistics department showed mining, manufacturing, and electricity grew 19.5%, 10.5% and 11.1%, respectively, in July from a year earlier.
Compared with 131.8 in July 2019, IIP is marginally lower at 131.4, signalling that factory output is getting closer to the pre-pandemic level.
The manufacturing index in July 2021 (130.9) was nearly as high as the level in October 2020 (132) during last year’s festive season, which offers a glimpse into the strength of the revival after the second Covid wave.
Out of 32 industry groups, tobacco, pharmaceuticals, and furniture manufacturing remained in negative territory in July. While capital goods, representing investment demand in the economy, expanded at 29.5% year-on-year, consumer non-durables representing fast-moving consumer goods contracted for the third consecutive month at 1.8% during the month.
Madan Sabnavis, chief economist at Care Ratings, said a critical part would be the expected revival in demand, especially for consumer goods, which will prompt companies to build up stocks.
“We may expect a high growth rate in August, too, as there was a decline in growth last year. However, from September onwards, the base effect will get diluted sharply as growth was positive in the next two months,” he added.
Aditi Nayar, chief economist at ICRA Ratings, said she expects IIP growth to improve to 13-15% in August.
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