May Industrial Output Data May Also Be Impacted By Lockdowns

Industrial production surged by a solid 134% in April 2021, as compared to April 2020, thanks to a low base, on account of nationwide lockdown in April 2020. However, some analysts feel that even the select lockdown in certain cities and states may also impact industrial output in May, 2021.

Madhavi Arora, Lead Economist, Emkay Global Financial Services, says, "Industrial production super-surged in April, growing 134% amid favorable base effects despite weakening momentum. On a sequential basis, April IIP degrew 12%, reflecting hit on production activity as major states like Maharashtra and Delhi led the localized lockdowns.

We note Maharashtra has 18% share in India's manufacturing GVA. The May IIP sequential growth may also be impacted owing to more pronounced localised lockdowns state wise. However, assuming Q1FY22 sees the maximum Covid-II heat and as larger proportion of the population are vaccinated, some pent-up demand could push manufacturing and overall GDP growth back up in H2FY22. We see FY22 GDP growth at 9.0%. We reckon the nascent and patchy K-shaped growth recovery post Covid-I came with a potentially scarring and divided labor market amid sub-optimal effective fiscal policy stimulus. The recovery ahead may again be led by capital and profits and not improving labor markets and wages."

Says Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm, "Industrial production grew at 134% for the month of April 2021 despite lockdown. There cannot be an absolute comparison as the astonishing figure is due to its comparison to the data recorded last year for the same month (April 2020) where most parts of the country were facing a severe lockdown. The industrial growth has slowed down 13% if compared month on month (March '21 vs April '21). The second wave has had its bearing on the industrial activities and may reflect on May IIP data too.

Moving forward, the industrial activity will pick up on a durable basis only once the pace of vaccination reaches a substantial milestone, number of cases comes under control and the respective state governments allow permission for regular economic activities."

While May and June 2021 may also see a slight impact, things should be restored to normal in the next few quarters. Many analysts have already cut the GDP forecasts for 2021-22 thanks to the second wave of Covid-19.

Investors would now keep a close eye on inflation data along with IIP in the coming few months, as oil prices have already risen sharply.