India's factory output, measured in Index of Industrial Production (IIP), steeply contracted by 16.7 per cent in March amid complete shutdown of industries due to coronavirus lockdown. It's a drastic contrast to a growth of 4.5 per cent in February. While the manufacturing output fell 20.6 per cent, electricity output shrank 6.8 per cent, the government data released Tuesday showed. The mining output remained stagnant in March, according to the Ministry of Statistics and Programme Implementation.
However, the government also issued a caveat that the drastic fall is on account of coronavirus lockdown. "In view of the global COVID-19 pandemic and consequent nationwide lockdown measures implemented since March, 2020, the data flow from the producing units was impacted. As some of these units are yet to resume operations, the response rate has been lower than usual. Consequently, the Quick Estimates are likely to undergo revision and will be incorporated in subsequent releases as per the revision policy of IIP," the ministry also said.
After hitting a 11-month high in February, the eight infrastructure sectors shrank 6.5 per cent in March. Earlier, the Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, fell to 27.4 last month from March's 51.8, by far its lowest since the survey began in March 2005. It is the first time it has gone below the 50-mark separating growth from contraction in nearly three years. "After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the coronavirus pandemic in April," IHS Markit said.
India has been under a lockdown since March 25. The coronavirus lockdown is expected to be lifted on May 17.
"Since the lockdown has extended in the month of April 2020 and first half of May 2020, the industrial output in April 2020 is also expected to decline as many industries remained shut during this period. Even the partial ease in restriction in certain parts has not led to resumption of activities to full capacity due to labour shortages. Thus, we expect IIP to contract even in the months of April and May 2020 post which it may improve marginally," said CARE Ratings.
"India's industrial output slumped to 16.7% in March from 4.5% in Feb, as the lockdown brought all activities to a sudden halt. The weakness in demand, labour constraints, and shortage in raw material shortages, had got a terrible hit. IIP indicates a shape down in GDP," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
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