Factory output shrinks 16.6% in June even as industries begin to reopen

Factory output shrinks 16.6% in June even as industries begin to reopen

With the lifting of restrictions in the subsequent periods, industrial activity is resuming, government said while releasing the industrial output data for June

Government data showd that industrial output picked up in June vis-a-vis the previous two months

India's industrial output, measured on the basis of Index of Industrial Production (IIP), contracted 16.6 per cent during June even as industries started on the path of resumption with lifting of lockdown restrictions. Government data released on Tuesday showed that the quick estimates for IIP for June 2020 stood at 107.8, as compared to 129.3 in the year-ago period. This is in line with the eight core industries' data for June which showed a decline of 15 per cent during the month.

However, MOSPI did cuation that it may not be appropriate to compare the IIP data in the post-pandemic months with those for months preceding the COVID-19 pandemic.

"In view of the preventive measures and announcement of nationwide lockdown by the government to contain spread of COVID-19 pandemic, a large number of the industrial sector establishments were not operating from the end of March, 2020 onwards. This has had an impact on the items being produced by the establishments during the period of lockdown," the Ministry of Statistics and Programme Implementation (MOSPI) said in a statement. "With the lifting of restrictions in the subsequent periods, industrial activity is resuming. The Index for the month of June 2020 stands at 107.8 as compared to 53.6 and 89.5 for April 2020 and May 2020."

The indices of industrial production for the Mining, Manufacturing and Electricity sectors for the month of June 2020 stand at 85.4, 106.9 and 156.2 respectively, MOSPI data showed.All three segments showed decline in output during the month - production in Mining fell by 19.8 per cent, in manufacturing by 17.1 per cent and in electricity by 10 per cent.

According to use-based classification, in June, the indices for primary goods stood at 109.2, for capital goods at 64.3, intermediate goods at 102.2, and for infrastructure and construction goods at 110.7. The indices for consumer durables and consumer non-durables stood at 77.4 and 157.3, respectively for the month under review.

"The IIP for the month of June slumped by 16.6 per cent, better than Reuters poll of (-)20 per cent. Ever since the nationwide lockdown began there has been an adverse impact on the production activity. The production rate remained in red even in June but the rate of fall has decelerated on a sequential basis mainly on account of relaxations in lockdown. Going ahead, with lockdown easing further, we may see some shining figures on the eight core industries like electricity, coal and will have a sliver lining on the growth," said  Rahul Gupta, Head of Research - Currency, Emkay Global Financial Services.