December 13, 2021
The base effect affected October’s industrial growth despite the growth in GST collection and core infrastructure sectors, according to experts.
In September, industrial growth based on the Index of Industrial Production (IIP) rose by 3.3%.
As much as the growth is stable, it is not upto the mark owing to the supply side issues afflicting the auto sector.
industrial output is likely to follow the same trend as observed in the periodic labour force survey.
Industrial production grew by 3.2% in October 2021, according to a government statement. In September, industrial growth based on the Index of Industrial Production (IIP) rose by 3.3%. In October 2020, it rose by 4.5%.
Experts have expressed a concern that the growth has been rather limited without much boost from the festival demand. According to Devendra Kumar Pant, Chief Economist with India Ratings & Research (Ind-Ra), the base effect affected October’s industrial growth despite the growth in GST collection and core infrastructure sectors, and that a contraction of 6.1% for consumer durable and 0.5% in consumer non-durable are proof of weak demand conditions in the economy.
With capital goods and consumer durables registering a YoY contraction in October, there are no indications of the recovery becoming stable and broad-basing further from the disaggregated data. This concern is further fueled by the fact that barring the auto sector, in which the ongoing supply challenges were sustained, the YoY performance of several other high frequency indicators, such as electricity demand, GST e-way bills, port cargo traffic etc, went down in November, indicating that economic activity has become perfunctory after the festive season ended, with the pent-up demand being satiated. The same pattern has also been observed on the investment front with a decline in the production of capital goods by 1.1% in October. According to Pant, industrial output is likely to follow the same trend as observed in the periodic labour force survey.
