Pre-Covid-19 show: Factory output at 7-month high in Feb

New Delhi: Buoyed by an increase in the output of mining and electricity generation, India’s factory output grew to a seven-month high of 4.5% in February from 2% in the preceding month before the government imposed a nationwide lockdown in March due to Covid-19.

The output of active Pharmaceutical Ingredients (API) and formulations of certain cholesterol-lowering drugs, which have a 0.31% weight in the index of industrial production (IIP) climbed a sharp 256.1%, data released by the National Statistical Office showed on Thursday.

The cumulative growth in factory output for the period April-February was 0.9% compared to 4% in the year ago period.

“The benefit of a low base year has pushed up this number. The thrust has come from mining and electricity and less from manufacturing,” said Madan Sabnavis, chief economist, CARE Ratings.

Pre-Covid-19 Show: Factory Output at 7-Mth High in Feb

While mining and electricity generation rose 10% and 8.1%, respectively, the growth in manufacturing was 3.2% in February.

ICRA principal economist Aditi Nayar said that a broad-based and sharper-than-expected pickup in industrial growth suggest that some parts of the economy were on the path of a gradual revival prior to the escalation of the Covid-19 outbreak.

“However, the solace provided by this is hollow, as social distancing and lockdowns are likely to result in a considerable industrial contraction in March particularly in manufacturing and electricity, which would likely intensify in April,” Nayar added.

The deepening contraction in capital goods output in February reinforces the view that investment intentions were sluggish even prior to the lockdown.

Economists said that going forward, there will be a reversal of trend in March due to the shutdown and the March-end phenomenon of companies pushing production to meet targets will not hold.

“For the year production could be in the range of 1-1.5% at best,” Sabnavis said.

Source Article