Factory output contracts by 35% in May

India’s industrial production witnessed a massive contraction for the third consecutive month in May due to the nationwide lockdown even though the decline was lower than April.

The government data showed the index of industrial production (IIP) contracted by 34.7% in May against 57.6% in April.

While manufacturing contracted by 39.3%, mining declined by 21% and electricity contracted by 15.4%.

“In view of the preventive measures and announcement of nation-wide lockdown by the Government to contain the spread of Covid-19 pandemic, the majority of the industrial sector establishments were not operating from the end of March, 2020 onwards. This has had an impact on the items being produced by the establishments during the period of lockdown and the subsequent periods of conditional relaxations in restrictions,” the central statistical organisation said.

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Economic activity across India was halted since the last week of March following the imposition of a nationwide lockdown to contain the spread of the coronavirus.

However, several restrictions were relaxed in May leading to an arrest in the decline.

According to the latest data, primary goods output contracted by 20% in May compared with 26.6% in the previous month.

Capital goods production declined by 64.3% as against 92% in April and consumer non-durables output declined by 11.7% in May compared to 48.7% the previous month.

The lockdown began to lift from the second week of June and consequently, the high-frequency indicators like vehicle sale, electricity consumption, PMI composite, core sectors growth and rail freight traffic in June indicate that the contraction will be less severe in IIP when the data for June is released next month.

“Ever since the nationwide lockdown began there has been an adverse impact on manufacturing, mining, infrastructure activities. Until the lockdown ends, the contraction in industrial production will continue to have a negative impact on India’s GDP,” said Emkay Global Financial Services.