Output of a third of manufacturing segments in Aug less than base year

Despite high headline numbers, the output of one-third of the segments in the manufacturing sector in August stood below even that in the same month in 2011-12, when the new index of industrial production (IIP) series started.

This is despite the fact that manufacturing grew 9.3 per cent in the month, driving up IIP growth to a 14-month high of 10.3 per cent.

Part of it is due to the devastation of these product categories by lockdowns induced by Covid waves and subdued export conditions, while part of it needs to be assessed further.

Eight manufacturing segments had their output index below 100 in August.

All indices in the IIP were at 100 in 2011-12 because it was the base year of the new series.

These product categories are tobacco products; wearing-apparel; leather and related products; woods and products of woods and cork; paper and products; printing and reproduction of recorded media; fabricated metal products; and other manufacturing products.

The combined weighting of these segments stood at 8 per cent in the IIP and 10 per cent in the manufacturing index.

Categories such as wearing- apparel, and leather and related products are labour-intensive and hence their subdued output may have had repercussions on employment.

Product segments like tobacco products, paper and products, and fabricated metal products have recorded output below 2011-12 in each month since at least 2022-23.

Paper and products saw its output below 2011-12 levels each month since Covid-hit 2020-21, and it was the same story with paper printing and fabricated metal products except for a couple of months in between.

Former chief statistician Pronab Sen attributed this trend to subdued exports in some products.

“Some such as apparel, and leather and leather products have a very high export orientation.

“That could explain part of it. The other part is less obvious,” he said.

In value terms, exports of leather and leather products contracted 4.75 per cent at $407 million in August.

Those declined 10.99 per cent at $1.9 billion during the first five months this financial year.

Exports of these products declined a further 21.18 per cent at $330.4 million in September.

This implies that leather and leather products may continue to come below 100 in the IIP in September too, the data for which would come next month.

Bank of Baroda chief economist Madan Sabnavis said several indices fell below 100 during the pandemic and were picking up.

A footnote in the press release given by the Ministry of Statistics and Programme Implementation (MoSPI) said these indices were to be interpreted considering the unusual circumstances on account of the pandemic since March 2020.

Sabnavis said the fall in some of these segments such as wearing-apparel was because of weak exports.

He pointed out the index of fabricated metal products was below 100 in August though production grew 22.4 per cent that month.

This was because the base was too low at 80.5 points in August last year.

Sabnavis said segments such as paper and reproduction of recorded media were obsolescent.

Source: Read Full Article