IIP Contraction In November 2020 Not Surprising, Say Analysts

IIP Data: Industrial production shrank by 1.9 per cent in November 2020

The industrial production in November 2020 shrank by 1.9 per cent, reversing the small gains witnessed in the earlier two months of the year. The index of industrial production (IIP) registered growth in October 2020. The manufacturing sector output declined by 1.7 per cent in November 2020. The mining output also contracted 7.3 per cent, while power generation grew 3.5 per cent, government data showed. According to a research report by Barclays, while adverse base effects partly drove the decline, the activity also moderated sequentially due to running out of inventory-rebuilding driven product demand. Overall, the month witnessed activity moving sideways with most indicators either declining or maintaining largely similar levels to prior months in November. (Also Read: Industrial Production Contracts 1.9% In November 2020 )
 

Here are some views and remarks from economists and analysts on the index of industrial production in November 2020:

Ms. Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India:

“The contraction in IIP for November is not surprising as the other high frequency economic indicators were also showing a moderation in growth. A lot of economic revival seen in the previous few months had been because of pent-up demand and festive demand, hence the growth momentum was expected to moderate. With daily COVID infection rate reducing, vaccine round the corner and the economy close to normalcy, the critical aspect will be at what level the growth momentum stabilizes”
 

Mr. Nish Bhatt, Founder & CEO, Millwood Kane International, an investment consulting firm:

”Post a recovery in industrial production in October, the IIP data for the month of November has plunged again, the negative print or de-growth in IIP is a cause of concern, this uneven growth puts some doubt on the recovery in overall economic growth. Falling IIP, core sector data hints that RBI should wait and stay with easy liquidity measures, government with further reforms and stimulus measures in the upcoming Union Budget..”

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Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research:

“The IIP print for Nov 2020 has been disappointing with a YoY contraction of 1.9 per cent as against a growth of 3.6 per cent witnessed in Oct 2020. The data reflects the uneven trajectory of the ongoing industrial recovery, the continuing uncertainty on a broad based demand revival beyond the pent up levels and also the slowdown in the export momentum over the last 1-2 months.”

”The persisting weakness in segments such as oil refining, textiles, apparels and paper continue to thwart a broader industrial recovery. Further, both consumer durables and non-durables production have seen a stagnation vis-à-vis last year, highlighting the uncertainty on consumer demand beyond the festive months. Given the lack of consistency in the IIP print, any meaningful GDP growth may be unlikely in Q3 FY21.”

Dr. Sunil Kumar Sinha, Principal Economist, India Ratings & Research:

”After 2 consecutive months of positive growth, factory output (Index of Industrial Production (IIP)) once again shows a contraction of 1.9 per cent in the month of November 2020. India Ratings and Research (Ind-Ra) had earlier said – “two consecutive months of positive growth is a good sign for the economy but we may have to watch the data for few months to believe that economy is firmly on a path of recovery.”

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