Though India's factory output showed sharp decline for the third consecutive month in May as the national lockdown imposed to contain coronavirus took a toll on several sectors such as manufacturing, but the pace of decline narrowed.
The National Statistical Office (NSO) released the index numbers as a majority of the industrial sector establishments were not operating since the end of March. This has had an impact on the items being produced by the establishments during the period of lockdown and the subsequent periods of conditional relaxations in restrictions, it said.
The government had earlier said that it would not be correct to compare the numbers with the previous months due to data constraints. According to the NSO, the index for the month of May 2020 stands at 88.4 as compared to 53.6 for April 2020, indicating a graded pick-up in industrial activity in the economy. The data, however, showed that the index of industrial production (IIP) contracted 34.7% in May compared to an expansion of 4.5% in the year ago month. The key manufacturing sector contracted 39.3% during the month compared to an expansion of 4.4% in the year earlier period.
The capital goods and consumer durables sectors recorded sharp contractions of over 60% in May, highlighting subdued investment climate and weakness in consumer demand in the economy. However, the extent of negative growth has been lower in May than April, economists said.
“Economic activity is likely to tread a bumpy path in the coming months,” said Aditi Nayar, principal economist at ratings agency ICRA. Nayar said the biggest pickup was displayed by infrastructure/construction goods sector, the contraction in which halved to 42% in May 2020 from 84.7% in April 2020, driven by cement and steel.
Economic activity has restarted and several sectors have shown some pick-up in demand, prompting the government to say that green shoots of revival are visible. But the economy remains under severe stress with most forecasts pointing to a deep contraction in 2020-21, with a possibility of a feeble rebound next year.
