Industrial manufacturing re-entered the unfavourable territory by contracting 1.6 per cent in January, primarily on account of the decline in output of capital items, manufacturing and mining sectors.
The output of the manufacturing sector — which constitutes 77.6 per cent of the Index of Industrial Manufacturing (IIP) — shrank by 2 per cent in January, as towards a progress of 1.eight per cent throughout the identical month final fiscal, as per knowledge launched by the federal government on Friday.
The worst efficiency was witnessed by the capital items sector, which recorded a contraction of 9.6 per cent in the course of the month below evaluation, in comparison with a 4.Four per cent decline a yr in the past.
A contraction of three.7 per cent was registered within the mining sector in January, towards a constructive progress of 4.Four per cent within the year-ago interval.
In the meantime, the Nationwide Statistical Workplace (NSO), which releases the IIP knowledge, has revised upwardly the IIP quantity for December 2020 from an earlier estimate of 1 per cent to 1.56 per cent.
The manufacturing facility out was in unfavourable territory in November 2020. It had posted constructive progress throughout September and October 2020.
Aditi Nayar, Principal Economist, Icra, mentioned the slippage of shopper items again right into a year-on-year de-growth in January 2021 is a key disappointment.
“We stay circumspect concerning the depth of the rebound in consumption instantly after the vaccine rollout widens, as some classes of households could select to rebuild the financial savings that they’d drained in the course of the lockdown and post-lockdown interval,” she mentioned.
The IIP contracted by 12.2 throughout April-January as towards an nearly flat progress of 0.5 per cent seen in the identical interval final fiscal.
As per the information, there was a contraction of 0.2 per cent within the shopper durables section and 6.eight per cent within the shopper non-durable part. These two segments have been in contraction throughout January 2020 additionally.
Nayar mentioned the sharp worsening within the efficiency of capital items in January 2021 was led by an opposed base impact, which is anticipated to be transient.
“Whereas we count on the Central Authorities’s capital spending to show a fast tempo within the fourth quarter FY2021, the outgo from state governments is prone to be combined, and the spending of the non-public sector could stay muted within the close to time period,” she mentioned.
M Govinda Rao, Chief Financial Adviser, Brickwork Rankings, mentioned the contraction in IIP numbers for January comes as a little bit of shock after turning constructive in December.
“The manufacturing sector continues to contract at 2 per cent exhibits that we nonetheless have a ways to cowl earlier than the economic system recovers,” he mentioned.