The month of Apr’20 was in the eye of the pandemic storm and witnessed nationwide lockdown without any relaxations. As such, it was expected that IIP numbers may contract sharply. The assessment of the level of contraction varied across market participants. Many of the correspondents contributing to the IIP data reported “Nil” production for the month of Apr’20. IIP contracted by more than 55% for the month of Apr’20 as compared to a contraction of 18.30% in the preceding month of Mar’20.
The IIP number may not necessarily reflect the exact state of the economy as much as it reflects the stringency of the lockdown that caused it. The official NSO press release mentions that “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.” Thus, even as the index numbers for the constituent sectors and their sub-industries were declared, the press release did not indicate YoY growth numbers.
All the sectoral components viz, Mining, Manufacturing, and Electricity witnessed degrowth. Similarly, the contraction was reported across use-based classifications as well. Primary Goods reported the least contraction and Consumer Durables reported the most severe disruption in manufacturing activity.
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The IIP was mostly on expected lines, with the lockdown keeping doors shut for most of the factories. As mentioned earlier, the latest numbers need not necessarily reflect the severity of slowdown. The actual impact of the pandemic on the manufacturing activity would be reflected in the IIP growth numbers for the subsequent months. As the lockdown is gradually relaxed, the recovery inactivity would be keenly watched. From the manufacturers’ perspective, they may not only be grappling with a low demand scenario but may have to contend with a lesser number of workforce. The migrants leaving in hordes may also have an impact on the pace of recovery, at least in the near term.
The demand revival remains the key for manufacturers and there have been limited measures to stimulate it at the current juncture
