Inflation | IIP in May rises 29.3% owing to the low base effect
The Index of Industrial Production (IIP) in May rose by 29.3% as compared to the last year on the back of the low base effect.
The number is slightly lower than expected, owing to the stringent lockdowns imposed in May in the face of rising infections during the second wave.
The output is still higher than that of May 2020 (contraction of 34.7%) because of nationwide lockdown implemented to curb the spread of Covid-19 disease.
Six out of the eight core sectors that constitute 40% of the whole IIP recorded positive growth in May. The core sector output grew by 16.8% in May 2021.
Cumulative growth of factory output in April-May stood at 68.8% as per the data released by government on Monday.
Manufacturing sector output went up by 34.5% whereas that in the sectors of Mining and Electricity saw a jump of 23.5% and 7.5% respectively.
Factory Output or IIP stood at 134.44% in April which was just 0.08% higher than the readings noted in April 2019.
“The sequential improvement engendered by the states’ phased unlocking over the course of June 2021 is expected to be offset by a normalising base (-16.6% in June 2020; -33.4% in May 2020). Accordingly, we expect a further step down in the pace of IIP growth to 15-20% in June 2021,” stated Aditi Nayar, Chief Economist at ICRA limited.
The localized lockdowns in May were implemented more extensively by states than in the month of April due to exponential rise in Covid infections. This would impact the growth in the first quarter of FY22.
Fitch Ratings recently trimmed India’s growth forecast down to 10 per cent for FY22 from 12.8 per cent estimated earlier this year. This arose from stunted growth post the second wave of Covid-19. According to them, rapid vaccination could ride the business and consumer confidence back up.
In Video: June inflation slows to 6.26 per cent; May IIP at 29.3 per cent