It came as no surprise to see that the IIP for the month of July came in the negative at (-)10.4% v/s (-)15.7% in June. Well, the only relief is that while majority of economists had expected the contraction to be over 12%, and in that context, its better – if one is trying to find a silver lining here.
The fall was all around but sharper in consumer durables and capital goods which led the fall. A quick look at the internals (MoM):
Manufacturing (-)11.1% v/s (-)16%
Mining (-)13% v/s (-)19.6%
Electricity (-)2.5% v/s (-)10%
Intermediate goods (-)12.5% v/s (-)23%
Primary Goods (-)10.9% v/s (-)14.5%
Capital Goods (-)22.8% v/s (-)37.4%
Consumer Durables (-)23.6% v/s (-)34.25%
Consumer Nondurables (-)6.7% v/s (-)14.3%
The statement said, “In view of the preventive measures and announcement of nation-wide lockdown by the Government to contain spread of COVID-19 pandemic, a large number of the industrial sector establishments were not operating from the end of March, 2020 onwards. This has had an impact on the items being produced by the establishments during the period of lockdown. With the lifting of restrictions in the subsequent periods, industrial activity is resuming.”
Along with the Quick Estimates of IIP for the month of July 2020, the indices for June 2020 have undergone the first revision and those for April 2020 have undergone the final revision in the light of the updated data received from the source agencies. The Quick Estimates for July 2020 have been compiled at a weighted response rate of 87 percent, the first revision for June 2020 at a weighted response rate of 93 percent and the final revision for April 2020 at a weighted response rate of 94 percent.
The only solace we can draw is that the contraction is slowing down. Maybe we will be looking at a single digit contraction for August but for the IIP to show a positive number, will take a couple of months more.