India’s industrial production shows a strong rebound in October

India’s industrial production increased for the second month in a row after six months of contraction.

The Industrial Production Index increased 3.6% in October 2020 compared to last year. Industrial production increased 0.5% in September compared to the 0.2% previously estimated, according to data from the Ministry of Statistics and Program Implementation on Friday.

A Bloomberg survey of economists had forecast PII growth in October of 1.1%.

Rahul Bajoria, chief India economist at Barclays, said that despite the upside surprise, industrial production growth may have peaked in the short term as inventory replenishment could be coming to an end.

Sector estimates

Among the three key sectors, mining remained in contraction, but others saw an expansion in activity.

  • Electricity generation grew by 11.2% in October after rising 4.8% in September.

  • Manufacturing production growth stood at 3.5% compared to a 0.2% contraction last month.

  • Mining production contracted 1.5% in October after rising 1.4% last month.

Industrial production, classified by the final use of goods, indicated a contraction only in primary goods.

  • The production of primary goods contracted 3.3% in October after a contraction of 1.5% in September.

  • Production of capital goods increased 3.3% after contracting 1.3% last month.

  • Production of intermediate goods rose 0.8% after a 1% contraction last month.

  • Production of infrastructure and construction goods grew 7.8% in October compared to a 2.5% increase last month.

  • Durable consumer goods production growth was 17.6% compared to a 3.4% increase in the previous month.

  • Non-durable consumer goods production growth was 7.5% in October compared to an increase of 2.4% in September 2020.

Capital goods production turned positive after a 21-month gap, although it is still 6% lower than the pre-Covid level, said Sunil Kumar Sinha, chief economist at India Ratings. Only consumer durables exceeded pre-Covid production level. While the positive growth in consumer goods in September and October bodes well for the economy, this can be described as green shoots at best, Sinha said.

Nayar also said that the healthy improvement in the performance of durable and non-durable consumer goods in October 2020 relative to the previous month is testimony to the expectation of an optimistic holiday season. “However, the benefit provided by the low base, especially for consumer durables, cannot be ignored. In our opinion, the underlying strength of demand remains mixed and is still tentative in some sectors. “