Data released by the National Statistical Office (NSO) showed India’s index of industrial production (IIP) rose to an annual 7.1% in April, compared with an upwardly revised 2.2% in March. The industrial output growth rose to an eight-month high in April, helped by a low base, pointing to a gradual and continuing recovery but the data still showed some areas of weakness in the sector, which is crucial for faster economic expansion.
The sector had grown by 133. 5% in April 2021 on the back of a very low base of 2020 when the Covid-19 induced lockdown had smothered economic activity and growth. Several indicators had pointed to the recovery gathering momentum, including PMI manufacturing surveys and GST receipts. The impact of the war in Ukraine and the breakdown in supply chains have triggered stubborn price pressures which will have an impact on growth and the manufacturing sector going forward. But economists were surprised by the resilience of the sector although they pointed to the weak spots that still need to be watched in the manufacturing sector.
Aditi Nayar, chief economist at ratings agency Icra said “When compared with the pre-Covid level of April 2019, the IIP was 6.8% higher in April 2022, with a double-digit growth in intermediate, infrastructure and primary goods, amid a flattish performance of consumer non-durables, and an unpalatable contraction in capital goods and consumer durables.” Nayar said the weak showing of capital goods output relative to the pre-Covid level confirms the view that the uptick in capacity utilisation in the fourth quarter of FY2022 will not trigger a rapid private sector capacity expansion in light of the uncertainties generated by geopolitical developments.
