Based on the very first revision of January ’21 information and final revision of November ’20 information, the IIP information for February ’21 do confirm the apprehension that lots of challenges are nonetheless left to revive the industrial development in the aftermath of the adverse effect of the pandemic.
Apart from a couple of segments led by automobile, tractors, 2 wheelers and FMCG solutions, the other segments of market are but to swim into the positive territory. And the information actually reflect what is taking place in the field. For instance, mining activities are but to commence following the completion of the auctioning method. In the very first 11 months of the existing fiscal, the sector has degrown by practically 10%. The electrical energy generation for the month of February is marginally positive. However, the manufacturing sector (weight: 77.6%) in the course of the month has dipped by 5% compared to January and for the complete year it is down by 12.6%, thereby pulling down the total IIP to a damaging 11.3%.
Analysing the segments below manufacturing, it is observed that standard metals (weights:12.8) is in the damaging category by a larger margin than in January’21. Total crude steel production in the nation is about 6-7% decrease than the prior year. A element explanation to this degrowth could be loss of 3 working days in February.
Among other key things below manufacturing, the manufacture of coke and refined petroleum solutions (Wt: 11.8) had a steep decline in production in the month. The manufacture of chemical solutions (wt: 7.8) has a marginal fall in output and the very same is correct for meals solutions (wt: 5.3) also.
The manufacture of motor cars, trailers and semi-trailers (wt: 4.9) is displaying a 4.9 per cent development in the month compared to final year. However, cumulatively the index is damaging. The auto sector has observed a production development of 15.36% in February’21 with positive development in sales observed in passenger automobiles (17.92%), in two wheelers (10.2%). The manufacture of other transport gear (wt: 1.8) is also positive in the course of February’21 as shown by larger procurement of railway supplies, despite the fact that developing of ships is nonetheless subdued. The manufacture of electrical gear (wt: 2.99) grows by 3.2% in the course of the month which coincides with current development in production of electrical sheets and CRC sheets.
The capital goods ( comprising of stress vessels and tanks, energy creating gear, transformers, material handling gear, furnaces, tractors, agricultural machinery, mining machinery, textile machinery, wagons and coaches and so forth.) has borne the maximum adverse effect of the Covid 19 pandemic.
The Budget for FY22 has earmarked a capital investment of Rs 5.54 lakh crore on infrastructure and it is anticipated that the index for capital goods would enter into the positive territory in the next 2-3 months. The intermediate goods (comprising of pipes and tubes, fasteners, gear box, ball bearings and so forth.) have cumulatively degrown by 12.2% in the very first 11 months of the final fiscal. The infra/building goods (wt: 12.34, comprising of steel frameworks for tower building, pre fabricated concrete blocks and so forth) is steel-intensive has also observed the very same degrowth of 12.2%.
The positive signal is shown by customer tough segment (wt: 12.84) that has grown by 6.3% in the month, on the other hand, cumulatively wants to do considerably more to enter into a positive territory. It comprises of a host of domestic appliances ( SS utensils, AC, washing machines, refrigerators, passenger automobiles, auto elements, 2 wheelers, bicycles and so forth).
The demand for customer solutions is mainly based on rise in disposable earnings and the propensity to spending by the households. It is noticed that price of development in PFCE (private final consumption expenditure) is going at the price of 20 per cent in Q2 of Fy21 to 18.4% in Q3 and it is sustaining comparable development price in Q4 also.
Thus IIP is most most likely to enter in the positive category shortly as more information on output in the prior months are compiled and commencement of investment in infrastructure sector as indicated in the Budget and in the method the capital formation would have a considerably bigger part to play in driving financial development of the nation in the coming months.
In reality this uncomplicated rationale has worked in shaping the current forecasts created by IMF which has improved the GDP development for USA to a record 6% to be driven by a enormous $1.9 trillion stimulus measure in the kind of investment in infrastructure (funding for highways, roads, rail network, airports, provide of clean drinking water, developing of communication network, reasonably priced housing and so forth) in addition to one more @2 trillion investment created in December’20.
The projection for GDP in India to develop by 12.6% in 2021 is based on the premise that the pandemic is controlled with appropriate vaccination and fixed asset investment in infrastructure goes up considerably by the government push for larger level of public investment. While revolutionary extended term funding and asset monetisation would provide funds for public investment, private corporate investment supplemented by FDI should flow in true estate, storage and warehouses, renewable power, mining, capital goods and building gear, logistic and transportation segments.
An ever developing manufacturing and industrial sector is the culmination of profitable implementation of all these financial projects. .
—Views expressed are individual
The author is Former DG, Institute of Steel Development and Growth