IIP growth 1.32% in January 2022
The third wave of Covid-19, driven by the Omicron variant, did not disrupt industrial activity in the Indian economy significantly, shows Index of Industrial Production (IIP) data for the month of January 2022
The third wave of Covid-19, driven by the Omicron variant, did not disrupt industrial activity in the Indian economy significantly, shows Index of Industrial Production (IIP) data for the month of January 2022. IIP grew by 1.32% on an annual basis in January 2022, which is an improvement from the 0.7% annual growth in December 2021 according to the data released by the National Statistical Office (NSO) on March 11.
January IIP numbers mark an end of a four month long deceleration in industrial growth until December 2021. IIP growth was 12.97% in August 2021 and it fell continuously to reach 0.73% in December 2021. To be sure, the higher growth rates in before the deceleration set in was also a result of favourable base effect.
In absolute terms, IIP stands at 138.4 in January 2022, which is higher than the pre-pandemic level of January 2020. While mining, manufacturing, and electricity generation experienced a contraction in January 2021, they have grown by 2.8%, 1.1% and 0.85% in January 2022, respectively.
To be sure, a sustained growth recovery still remains a cause for concern. “Though loss in growth momentum was expected due to the spread of omicron variant of COVID 19 pandemic, but inability of the industrial sector to recover on a sustained basis point towards deeper problem like weakness in demand and/or supply side issues”, said a note by Dr. Sunil Kumar Sinha, Principal Economist, India Ratings and Research.
If one looks at the IIP components by use-based classification, consumer goods category continued to contract for the fifth consecutive month, suggesting that mass incomes and demand continue to be an area for concern. It was the infrastructure/construction goods sector generated tailwinds for the headline IIP growth number with a sub-sector growth of 5.4%. The capital goods sub-sector also contracted by 1.39% in January 2022, making it the fourth consecutive month of contraction.
“As the geo-political situation has worsened after the Russia Ukraine conflict and has the potential to turn into a major headwind for the economy, Ind-Ra believes ongoing industrial recovery will need more policy support”, Sinha added in his note.