New Delhi: India’s factory output, measured as the Index of Industrial Production (IIP), registered a marginal growth of 1.7% in February this year as against the growth recorded during the same month last year, as per the official data released this week. Despite a massive liquidity of infusion by the Reserve Bank of India over the last two years and a third wave triggered by the highly contagious Omicron variant of Covid-19 virus not hitting the country badly, the growth of just 1.7% is disappointing as IIP had recorded a negative growth a year ago and provided a low base to compare factory output in February this year.
Sunil Sinha, Principal Economist at India Ratings and Research, says growth in the Index of Industrial Production (IIP) continues to paint a dismal picture when it comes to analysing the ongoing economic recovery. For instance, the manufacturing sector, the largest component in the IIP, registered a growth of just 80 basis points while mining and electricity registered a growth of 4.5% in February on a year-on-year basis. As per the use-based classification, four out of six segments, namely primary goods, capital goods, intermediate goods and infrastructure goods witnessed positive growth in February.
Infrastructure goods offer some hope
The most notable improvement in the IIP was the production of infrastructure goods, which registered a growth of 9.4% in February as the Centre has allocated a record budget for infrastructure creation in the country in the last budget. But all is not well with the economy. For example, both consumer durables and nondurables recorded a contraction of 8.2% and 5.5% in February. For consumer durables, this is the fifth straight month when the production has come down. In the case of consumer nondurables, the production contracted in the month of February following weak growth in the last few months.
According to economists, weak private sector consumption, which is the biggest component of the country’s economic growth from the demand side, is the biggest risk for economic recovery. It is also reflected in the weak production of capital goods in the country in February this year. Except for the production of electricity in the country, two other sectors such as manufacturing and mining registered lower production in February this year in comparison with their production in February 2020 when the Covid-19 pandemic had not hit the country.
Similarly, barring the production of infrastructure goods, the factory output of all other use-based segments in February this year was lower than the pre-Covid level. Industrial production, which has been languishing for the past several months, is set to remain weak for the next few months due to the outbreak of the Russia-Ukraine war in February this year, which shows no sign of any early resolution.
