Manufacturing sees slow recovery after Covid

India’s manufacturing sector is returning to normal after Covid. Only 11 of 23 manufacturing sectors recorded positive year-over-year growth through October 2021, according to data from a report released by Mumbai brokerage firm Nirmal Bang. In September, 13 sectors recorded positive growth.

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Pharmaceuticals and chemicals, which had performed well during the pandemic period, are now slowing although they remain above pre-Covid levels, according to the report. However, 15 of 23 manufacturing sectors are above pre-pandemic level, which is encouraging. Sectors that are below pre-pandemic levels include refined petroleum products, textile clothing, paper products, beverages, printing, wood products, leather products, and furniture.

Highlights of the October Industrial Production Index (IIP)

IPI is flattening out but above pre-pandemic level. IPI growth for October 21 was 3.2% yoy, slightly below Bloomberg’s consensus estimate of 3.5% yoy (our estimate: 4% yoy ). It remained stable against the 3.3% year-on-year growth recorded on September 21.

Mining production grew 11.4% yoy on October 21, while manufacturing output grew 2% yoy and power generation grew 3.1% yoy.

According to the goods-based classification, the production of capital goods fell 1.1% year-on-year while the production of durable consumer goods fell 6.1% year-on-year, mainly due to the decline in automobile production.

The IIP is 7.8% above the October 19 level and is up 3.8% on a two-year CAGR basis, but the recovery appears to be flattening.

On a sequential basis, boosted by the holiday season, most sectors recorded improvement (with the exception of power generation, capital goods and consumer durables).

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