India's industrial activity showed signs of a rebound as August deceleration rate in factory output eased on a sequential basis, official data showed on Monday.

However, the Covid-19 pandemic continued to subdue India's factory output on a year-on-year basis.

As per the Quick Estimates of Index of Industrial Production (IIP), the contraction in factory output eased to (-) 8 per cent in August from (-) 10.77 per cent reported for July and (-) 1.4 per cent recorded during the corresponding period of the previous fiscal.

The Ministry of Statistics and Programme Implementation's estimates document said that the current index readings should not be compared with those of the months preceding the Covid-19 pandemic.

"With the gradual relaxation of restrictions, there has been a relative improvement in the economic activities by varying degrees as well as in data reporting," it said.

The IIP for mining, manufacturing and electricity sectors for J uly 2020 stood at 83, 117.4 and 162.7, respectively.

In August, the manufacturing production de-grew by (-) 8.6 per cent from (-) 1.7 per cent reported for the corresponding month of last year.

Similarly, electricity generation contracted by (-) 1.8 per cent from (-) 0.9 per cent during August 2019.

The mining output declined by (-) 9.8 per cent on a YoY basis.

Furthermore, the data on a YoY basis showed that manufacturing of primary goods de-grew by (-) 11.1 per cent, capital goods by (-) 15.4 per cent, and intermediate goods (-) 6.8 per cent.

Similarly, the production of infrastructure or construction goods contracted by (-) 2.3 per cent and consumer durables by (-) 10.3 per cent.

Consumer non-durables showed a growth of (-) 3.3 per cent.

"The muted improvement in the IIP in August 2020, despite a favourable base effect, indicates a plateauing of the industrial recovery upto that month, juxtaposed with the flurry of encouraging signals from the early data for September 2020," said Aditi Nayar, Principal Economist, ICRA.

The disaggregated data for August 2020 reveals mixed trends, with a continued improvement in consumer durables, capital goods, infrastructure goods and intermediate goods offset by a slippage in the performance of consumer non-durables and primary goods.

According to Sunil Kumar Sinha, Principal Economist, India Ratings and Research: "Though economic activities are yet to reach the pre-Covid-19 level, it is gaining traction with each passing month albeit at a reduced pace. As a result, the factory output contraction for the month of August 2020 declined to 8 per cent YoY as compared to 10.8 per cent in July and 15.8 per cent in June."

"The recovery trajectory shows that power production may soon register yoy growth instead of registering contraction. It contacted by 1.8 per cent in August 2020 as compared to 2.5 per cent in July and 10 per cent in June. However, the road for the other two broad-based segments, namely manufacturing and mining still looks distant."

Additionally, Rahul Gupta, Head of Research - Currency, Emkay Global Financial Services, said: "A large number of industrial establishments are not working regardless of the unlock. But the pickup in manufacturing and service sector is helping the IIP move in the right direction."