IIP growth turns positive in September, rises 0.2%

The index of industrial production (IIP) rose by 0.2 per cent in September 2020 compared to its year-ago level. This was the first month since the lockdown when the index reported a year-on-year growth.

Shivani Sharma, Mohsin Shaikh

Mining activity grew to a 7-month high of 1.4% in September 2020 compared with (-)8.6% growth in the corresponding period last year. Low base effect coupled with resumption of industrial activity and increase in power demand has led to the growth during the month.

Manufacturing which has the highest weightage (77.6%) in the IIP has fallen for the seventh consecutive month and recorded negative growth of (-)0.6% in September compared with (-)4.3% in September 2019 and (-)7.9% in August 2020.

Electricity output grew by 4.9% in September 2020, its highest pace in the last 8 months compared with negative growth of (-)2.6% in September 2019. Favorable base effect, higher industrial activity and resumption of commercial offices during the month has driven growth in the sector.

Infrastructure goods have barely moved in the positive territory with a growth of 0.7% in September after 6 consecutive months of negative growth.

The growth in consumer durables (2.8%) and consumer non-durables (4.1%) is the biggest positive in the IIP classifications for September. This reflects improvement in consumer demand in the economy and reflects additional production by companies ahead of the festive season.

Although growth in industrial production of capital goods (-3.3%) is negative for 21 consecutive months, the sharp improvement seen in this segment from the previous month is reflective of investment activity picking up in the economy.