Factory output rises 7.1 per cent in April, is at 8-month high

India’s factory output growth rate accelerated to an eight-month high at 7.1 per cent annually in April on the back of a lower base, according to data released by the National Statistical Office. Sequentially, the index of industrial production (IIP) contracted 9.2 per cent as manufacturing and mining output fell sharply.

Sequentially, mining output contracted 19.7 per cent and manufacturing output fell 8.8 per cent while electricity generation grew 1.8 per cent.

According to use-based classification also, the slowdown in activity was visible across the board. All the six sectors including capital goods (-18.7 per cent), consumer durables (-13.4 per cent) and consumer non-durables (-6.5 per cent) contracted sequentially in April.

Aditi Nayar, chief economist at ICRA Ratings, said the low base of the second wave of Covid-19 bumped up the IIP growth to an 8-month high of 7.1% in April 2022. “The weak showing of capital goods output relative to the pre-Covid level confirms our view that the uptick in capacity utilisation in Q4 FY2022 will not trigger a rapid private sector capacity expansion in light of the uncertainties generated by geo-political developments,” she said.

Nayar said the daily average generation of GST e-way bills dipped to a four-month low in May, which may be an early indication of the disruption being caused by higher prices on household budgets.

“Moreover, the YoY growth of non-oil merchandise exports eased in May relative to the previous month. However, most other high frequency indicators recorded an accelerating growth on a declining base in May. Given the sharp YoY expansion displayed by most high frequency indicators in May, we expect the IIP growth to rise further to 17-19% in that month, on the back of a falling base related to the second wave of Covid-19 in India in May 2021,” she said.

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