IIP edged up 0.08% in April same month in 2019

#GS3 #ECONOMY #IIP #REPORT #FINDINGS 

Context: 

According to the most recent Index of industrial Production (IIP) data released by the National Statistical Office, India’s April industrial output edged up 0.08%, from the extent recorded during an equivalent month in 2019.

KEY POINTS:

  • The NSO observed that the IIP data wasn't comparable the year-earlier figures;
  • As the majority of the establishments didn't operate in April 2020’ as a results of the nationwide lockdown imposed to curb the spread of COVID-19 infections.
  • The manufacturing sector, hit hardest by last year’s national lockdown, posted a 0.9% decline in comparison with April 2019.
  • Economists stated that the IIP data needed to be seen in perspective, given the impact of the second wave.
IIP growth slows to 1.7%, retail inflation rises to 2.57% - The Hindu

Purchasing Manager Index (PMI), e-way bills:

  • It would be better to trace PMI, e-way bills and GST collections to urge a good assessment of activity within the industrial sectors.
  • Electricity output was 6.81% above the pre-COVID-19 levels of April 2019.  
  • Similarly, mining output was 0.2% above the same month in 2019.
  • According to the ICRA, capital goods and consumer durables output trailed the April 2019 levels by 14.3% and 11.6%, respectively.
  • It suggests that the widening State-wise restrictions that were imposed during the month impacted production amid a weakening outlook for investment activity and consumption.
  • Manufacturing moderated by 12.6% in April from the previous month, narrower than the slippage of 17.5% within the GST e-way bills generated over a similar period of time .
  • This suggests that inventories may have built up, with dispatches being limited by the second COVID surge that was underway in April.

Sequential Contraction:

  • On a sequential, month-on-month basis, April’s IIP contracted over 12%.
  • It was reflecting successful on production activity as major industrial hubs were under lockdown.
  • Maharashtra has an 18% share in India’s manufacturing Gross Value Added (GVA).

BIASA BASICS 

Purchasing Manager Index (PMI):

  • It is an index of the prevailing direction of economic trends within the manufacturing and service sectors.
  • It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying constant, or contracting.
  • The purpose of the PMI is to produce information about current and future business conditions to company decision-makers, analysts, and investors.
  • It is based on a monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity.

Index of industrial Production (IIP):

  • The Index of industrial Production (IIP) is an index that shows the expansion rates in several industry groups of the economy during a fixed period of time.
  • It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
  • IIP may be a composite indicator that measures the growth rate of industry groups classified under:
  • Broad sectors, namely, Mining, Manufacturing, and Electricity.
  • Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods.
  • The eight-core sector industries represent about 40% of the load of things that are included within the IIP.
  • The eight core industries in decreasing order of their weightage:
  • Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.
  • The base year for IIP calculation is 2011-2012.

Significance of IIP

  • IIP is that the measure of the physical volume of production.
  • It is employed by government agencies including the Ministry of Finance, the Federal Reserve Bank of India, etc, for policy-making purposes.
  • IIP remains extremely relevant for the calculation of the quarterly and advanced Gross Domestic Product (GDP) estimates

 

SOURCE: THE HINDU 

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