This Article is From Dec 11, 2020

'Positive Surprise But Unlikely To Continue': Analysts On Industrial Production In October

The industrial production grew by 3.6 per cent in October 2020, the highest level since February 2020, supported by better performances in electricity and manufacturing generation sectors

'Positive Surprise But Unlikely To Continue': Analysts On Industrial Production In October

The industrial production grew by 3.6 per cent in October 2020

The industrial production grew by 3.6 per cent in October 2020, the highest level since February 2020, supported by better performances in electricity and manufacturing generation sectors. This is a significant rise in factory output after it declined consecutively for six months amid the COVID-19 pandemic. The index of industrial production (IIP) rose marginally by 0.5 per cent in September 2020. The manufacturing output grew by 3.5 per cent, the very first rise in almost eight months, electricity output rose by 11.2 per cent. (Also Read: Industrial Production Grows 3.6% In October ). Here are some views and remarks from economists and analysts on the index of industrial production in October 2020:
 

'Positive Surprise But Unlikely To Continue,' says Mr. Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers:

''Buoyed by pent-up demand and festive sales, Industrial growth during Oct'20 at 3.6 per cent was ahead of expectations but unlikely to sustain. We do not expect any change in monetary or fiscal measures. Industrial production growth during Oct'20 at 3.6 per cent was ahead of expectations. In terms of latest industrial growth, India is the third best performing among the G 20 countries, behind Turkey and China.''

''On year till date basis, however, India is the worst performing among the G 20 countries. Pent up demand for durables from the lock down period coincided with festive sales leading to robust growth. While this has been ahead of expectations, the pace is unlikely to sustain. Positive surprise on growth side coupled with higher than expected inflation would constraint the RBI to carry out further monetary accommodation in the near-term. However, given the early phase of the recovery and the possibility of growth dip, reversal of current accommodation is likely. At the same time, we do not expect any fiscal accommodation during the current year..”

Dr. Sunil Kumar Sinha, Principal Economist, India Ratings and Research:

''IIP in October 2020 grew 3.6 per cent. This is an eight months high. Base effect, pent up/festive demand and gradual normalization of economy all helped the October 2020 IIP. Manufacturing activities are gradually reaching to the pre-COVID level and are now just 2.6 per cent lower than February 2020 level. Electricity generation has already surpassed pre-COVID level  and is now 5.5 per cent higher but mining activities are lagging and is even now 20.5 per cent lower than February 2020 level.''

''No doubt two consecutive months of positive IIP growth is a good sign for the economy, India Ratings and Research (Ind-Ra) is only cautiously optimistic and may wait for few more months to believe that economy is firmly on a path of recovery since in the past IIP growth, more than once, has collapsed after couple of months of good growth.''

Mr. Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services:

''Better than both our estimate of 0.8 per cent and market consensus of 1.0 per cent, IIP growth climbed up to 3.6 per cent YoY in Oct'20 from only 0.5 per cent a month ago and -6.6 per cent in Oct'19. This was led by a turnaround in manufacturing activities in Oct'20. While power generation grew double digits, mining activities continued to see contraction in Oct'20. Capital good production grew for the first time in 24 months in Oct'20 and infrastructure/construction activities grew at the fastest pace in 22 months.''

''Overall, better-than-expected growth in IIP in Oct'20 might have just been a case of high festive demand and whether the growth momentum continues is yet to be seen. In any case, we don't expect RBI to cut rates anytime soon.''