The 3.6% figure has beaten most expert estimates, which were closer to two percent. The previous high was in February, when IIP rose 5.2 per cent. Factory output had grown 0.48 per cent in September, the first time it did so after February.
New Delhi: India’s factory output expanded for the second consecutive month in October to touch an eight-month high, signalling that the recovery trend remains steady. The Index of Industrial Production (IIP) rose 3.6 per cent from the year earlier, buoyed by festive demand and aided by a sharp base effect. The previous high was in February, when IIP rose 5.2 per cent. Factory output had grown 0.48 per cent in September, the first time it did so after February.
India imposed a nationwide lockdown in March to contain the spread of Covid-19 and the restrictions were gradually lifted May onward. However, independent economists called for caution in interpreting the strength of the recovery based on October data. ICRA expects IIP to slip back into a mild contraction in November.
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Manufacturing and electricity rose 3.5 per cent and 11.2 per cent, respectively, while mining output shrank 1.5 per cent, data released Friday showed. Of the 22 manufacturing sub-sectors, beverages, furniture and apparel, along with six others witnessed a contraction in October. “The disaggregated data was mildly encouraging, with only primary goods reporting a sequential deterioration, and also continuing to display a year-on-year contraction in October,” said ICRA principal economist Aditi Nayar.
Other Data Mixed Consumer durables production, an indicator of urban demand, grew 17.6 per cent while consumer nondurables witnessed 7.5 per cent growth. Both had contracted in October last year.
Capital goods — an indicator of investment — emerged from 21 months of contraction and grew 3.3 per cent in October. “In our view, the underlying strength of demand remains mixed, and is still tentative in some sectors,” Nayar said.
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During the April-October period, India's industrial production shrank 17.5 per cent on year. In the September quarter, India’s GDP contracted 7.5 per cent, from a historic 23.9 per cent decline in the first quarter.
Other data have been mixed — manufacturing PMI fell to a three-month low of 56.3 in November from 58.9, a high of more than 12 years, in October. Passenger vehicle sales, however, grew for the fourth straight month in November.
“It needs to be seen if this positive growth can be sustained for another two months before we can conclude that there is a turnaround,” said CARE Ratings chief economist Madan Sabnavis. “October has been a month of festivals which has aided production build-up for both October and November.”
While manufacturing has enjoyed a “decent run of gains,” contact-intensive services, such as hospitality, transport and tourism will likely make major gains, given they are the last to emerge from lockdown restrictions, said Barclays chief India economist Rahul Bajoria.
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