Bounce Back of Indian Industry Post-Pandemic
The pandemic that started in 2019 took a toll on all economies. A series of lockdowns adversely affected production levels of the industry. In 2022, it can be observed that the industrial sector in India is coming back to pre-COVID levels.
How can we say this?
This can be understood through the data published by the Government authorities and some indexes created to evaluate the performance of the industry.
- Estimates of Economic Activity by the Government
The Ministry of Statistics and Programme Implementation (MoSPI) publishes quarterly estimates of Gross Domestic Product (GDP) and its components. In these estimates, a study of various sectors and industries is also presented. In the month of February 2022, MoSPI released Second Advance Estimates. It also includes the Gross Value Added (GVA) which gives the rupee value of goods and services produced in the economy after deducting the cost of inputs, raw materials used, and taxes. According to that, at current prices, the economic activity across eight industries has increased by 18.3% compared to the previous year 2020-21. This clearly supports the claim that the industry has bounced back post-pandemic.
- Index of Industrial Performance (IIP)
The Index of Industrial Production (IIP) is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to those in a chosen base period. This index gives the growth rates of different industry groups of the economy over a specified time period. All India Index of industrial production has been released on a monthly basis with a time lag of 42 days on the 12th of every month (or a previous working day, if the 12th is a holiday).
The industry groups that it measures are classified under broad sectors like manufacturing, mining, and electricity. Use-based sectors like capital goods, basic goods, intermediate goods, infrastructure goods, consumer durables, and consumer non-durables.
IIP shrank 57.3 percent in April 2020 due to a decline in economic activities in the wake of a lockdown imposed to curb the spread of coronavirus infections. Then, it fell by 0.6% in the month of January 2021 and rose just 0.4% in the month of December last year. This year, in January 2022 it rose to 1.3 percent after a fall due to the pandemic, demonstrating a mild sign of recovery.
Further, the eight-core industries of India representing about 40% of the weight of items included in IIP had registered a growth of 4% year-on-year in January 2022. Six out of the eight core sectors, viz., coal (6.6%), natural gas (12.5%), refinery products (8.8%), steel (5.7%), cement (5.0%) and electricity (4.0%) reported a growth in the month of February while crude oil (-2.2%), and fertilisers (-1.4%) contracted.
- Purchasing Managers Index (PMI)
Purchasing Managers’ Index (PMI) is an economic indicator, which is derived after monthly surveys of different companies in the manufacturing and service sectors. PMI is derived by sending fact-based questions to a large number of companies in the concerned sector. The questions are related to five key variables. The variables with their weights in the index are — new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%), and stock of items purchased (10%).
The IHS Markit India Manufacturing Purchasing Managers’ Index measures the performance of India’s manufacturing sector. The index is derived after a survey of 500 manufacturing companies.
The IHS Markit India Manufacturing PMI increased to 54.9 in February 2022 from a four-month low of 54.0 in the previous month. A PMI number greater than 50 indicates expansion in business activity.
The IHS Markit India Composite PMI increased to 53.5 in February 2022 from a six-month low of 53.0 in the prior month, with manufacturers recording a notably stronger growth in business activity than their services counterparts, although rates of expansion quickened in both cases.
From all the three indicators, it is evident that industrial performance has improved and it is bouncing back after the disruption caused by the pandemic.