Friday, 12 Sep, 2025
Industrial production was hit hard during the pandemic period. It had shrank 57.3% in April 2020 due to a decline in economic activities
India’s industrial production soared to a 12-month high in May 2022 on the back of strong performance in mining, manufacturing and electricity sectors triggering hopes of a strong post-pandemic industrial recovery.
According to the Index of Industrial Production (IIP) data released by the National Statistical Office (NSO), industrial growth surged to 19.6 percent in May from 7.1 percent in April. At 19.6 percent, the May industrial growth rate is the highest in one year. IIP growth in May 2021 was 27.6 percent. Growth in the April-May period was at 12.9 percent compared with an expansion of 67.3 percent in the year earlier period.
Manufacturing sector leads the way
Manufacturing sector, which represents a major chunk showed a sharp increase of 20.6 percent compared to a growth of 32.1 percent recorded in the year-ago period. Similarly, the power sector shot up by 23.5 percent as against 7.5 percent a year ago, while the mining sector witnessed an expansion of 10.9 percent in May 2022 compared to a growth of 23.6 percent last year. The index of all the three sectors stood at 134.5, 120.1 and 199.9 respectively.
Capital goods output, which is a barometer of investment, showed a growth of 54 percent in May 2022 while the consumer durables segment grew by 58.5 percent against a growth of 80.4 percent a year ago. Experts do point out that the steep growth on a year-on-year basis is mainly due to a lower base during the Covid-induced lockdown
What is IIP?
Index of Industrial Production (IIP) maps the change in the volume of production in Indian industries usually of a month, as against the reference period. It is a composite indicator of the general level of industrial activity in the economy. The sub-components of the index is considered more important. For example, a growth in consumer driven industries signifies increase in demand for consumer goods and denotes higher purchasing power of people. Similarly, a recovery in capital goods sectors shows industrial growth.
Industrial production was hit hard during the pandemic period. It had shrank 57.3% in April 2020 due to a decline in economic activities. Thereafter, it remained below 4.4% throughout the year and touched the lowest level of 1% in November as well as December 2021.
Too early to call victory
A significant pick-up in IIP growth is indicative of ongoing economic recovery. However, the continued weakness in the consumer non-durables segment is concerning. A modest 0.9 percent recovery reflects the continued disruption in consumer market and sluggish private consumption due to the rising prices. This is largely due to bottlenecks in supply-demand chain, high inflation and slowing global growth. This could affect other sectors as decreased Consumer Spending will lead to lower demand. The producers will respond to this low demand situation by reducing their production. Experts believe that IIP growth has been somewhat erratic and hence it needs to remain constant over a period of time in order to indicate stability in industrial numbers.
Going ahead, there are broad macro-economic challenges which will continue to affect the overall IIP numbers. With retail inflation continuing to breach RBI's comfort zone, the central bank may be forced to tighten its monetary policy. Monsoon progress will also have a substantial over food inflation.
