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IIP contracts by record 55% in April due to lockdown, but Modi govt says data not comparable

The data showed manufacturing contracted by 64 per cent in April, followed by mining at 27 per cent and electricity by 26 per cent.

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New Delhi: The Index of Industrial Production (IIP), a way of measuring factory output, contracted by a record 55 per cent in April, when compared to the same period a year ago, as the Covid-19 pandemic and the subsequent economic lockdown adversely impacted production.

The index had contracted by 18 per cent in March, according to revised data for that month.

The data for April showed manufacturing contracted by 64 per cent, followed by mining that contracted by 27 per cent and electricity by 26 per cent. 

Capital goods production — a key indicator of investment demand — contracted by 92 per cent in the month. Production of consumer durables also contracted by 96 per cent. 

Primary goods production contracted by 27 per cent, while consumer non-durables contracted by 36 per cent.

The Modi government, however, said the April data is not comparable with that of the previous year as many units reported “nil production”.

Also read: Indian economy to shrink by 3.2% in fiscal year 2020-21: World Bank

‘Not appropriate to compare April IIP with earlier months’

In a statement, the government said due to the nation-wide lockdown beginning 25 March to contain the spread of Covid, majority of the industrial sector establishments were not operating from the period beginning end of March. 

The nationwide lockdown lasted the whole of April and most of May before the government started unlocking some regions where the pandemic was not widespread. 

“This has had an impact on the items being produced by the establishments during the month of April, 2020, where a number of responding units have reported NIL production. Consequently, it is not appropriate to compare the IIP of April, 2020, with earlier months, and users may like to observe the changes in IIP in the following months,” the statement said. 

Aditi Nayar, principal economist at the ICRA Ratings, said the “worst affected categories in April 2020 were consumer durables, capital goods and infrastructure/construction goods, with end-demand severely constrained by the lockdown. In contrast, consumer non-durables, which include several essential items, and primary goods recorded a relatively moderate fall in the level of output in April 2020.”

She added there could be a modest recovery in May in some of the sectors that were acutely affected by the lockdown if one takes into account indicators like rail freight, GST e-way bills, and fuel and electricity consumption. 

Also read: Coronavirus lockdown subdued ‘animal spirits’ of Indian economy in March


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