IIP growth of 8 Month High however, concerns linger

IIP growth of 8 Month High however, concerns linger

In News:

• The growth in industrial output reached an eight-month-high in April, suggesting an ongoing and gradual growth.

What's in Today's Article:

• Index of Industrial Production (IIP) - - About, the components
• News Summary

In Focus: Index of Industrial Production (IIP)

• The IIP number is a measure of the industrial production during the time being reviewed, typically one month, compared to the reference period.
• There is an delay that is six weeks when it comes to the release of the IIP index data following the reference month has ended.
• It is calculated currently using 2011-2012 as the year of base.
• National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI) makes available the IIP information.

IIP Index Components

• IIP is an indicator composite that evaluates the rate of growth of industries that fall under
  • Broad sectors, including Mining (14.4 percent) Manufacturing (77.6 percent) as well as Electricity (8 percent)
  • Utilization-based industries, including basic Goods, Capital Goods and Intermediate Goods etc.
• The Eight Core Industries comprise 40.27 percent of the total weight of the products included as part of the IIP.

News Summary

• India's growth in industrial output according to the IIP report, jumped to an 8-month record of 7.1 percent in April, compared to 2.2 per cent the month before.
  • In absolute terms in absolute terms IIP was 135.1 at the end of April in 2022. This was an increase from 126.1 from April 2021 however, it was lower than 148.8 in March 2022.

Key Highlights

Sector-wise performance

• The electricity sector The sector of electricity recorded an impressive growth of 11.8 percent in the month in review.
  • The index of electrical output reached the all-time record (2012 series) of 194.5.
  • It was mostly driven by the dramatic rise in electricity production due to shortfalls caused due to the summer heat.
• Mining & Manufacturing sector Mining recorded an increase of 7.8 percent and manufacturing saw an increase of 6.3 percent year-on-year in April.
• The capital goods industry isThis sector increased by 14.7 percent while the consumer durables industry saw a growth of 8.5 percent during the month in review.
• The Consumer non-durable sector only a tiny increase of 0.3 percent.
  • This is a sign that consumers are cautious about spending.

Analysis

• Uncertain about the durability
  • There remain doubts regarding the longevity of the recovery in the industrial sector amid a soaring inflation rate and a tense external environment.
  • However, the year-over-year growth of the IIP is expected to increase further in the coming months on backdrop of a positive base that is linked to the Covid-19 second wave.
• Certain sectors have yet to achieve the pre-Covid level
  • The comparison between the current information with the pre-Covid production levels (February 2020) shows that the total industrial output is much higher than that of pre-Covid, but by only 0.7 percent.
  • However the production levels of three of the segments that are based on usage including capital goods, consumer durables , and consumer non-durables are lower than the pre-Covid levels.

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