Nevertheless, we continue to caution that pent-up demand contributed to the improved performance of certain categories of
in June-July 2020, which may not sustain in August 2020 due to the extension of localised lockdowns in various states,” said Aditi Nayar, principal economist, ICRA.
Devendra Pant, chief economist at India Ratings, said sequential improvement in June was on expected lines. "However, the economic activities have not improved much in July and August and does not give confidence for quick recovery," he said. Ind-Ra expected all the four quarters of 2020-21 to record contraction in GDP.
"We continue to expect the economy to experience a sharp contraction during April-June quarter, as economic recovery fails to gain speed due to local lockdowns imposed by various states through July," said Rahul Bajoria at Barclays.
After releasing only the index numbers for the IIP
for the previous two months, the government on Tuesday announced the total data for June but cautioned that comparing the IIP in the pandemic months with those preceding Covid-19 would not be appropriate.
On traditional year-on-year, all the components of the IIP — mining, manufacturing, and electricity — saw contraction, albeit by a smaller magnitude, than in the previous month. Manufacturing, which accounts for 78 per cent of the IIP, saw output fall by 17.1 per cent in June, less than half of the 38.4 per cent contraction in May. Inherent stress in the sector had become visible since March, but came out at full blast in April, when output had fallen by 67.1 per cent.
All but two of the 23 sub-sectors within manufacturing
posted a year-on-year contraction. Buoyed by drug exports and orders for sanitizers and protective gear, pharmaceutical production rang up a 34 per cent rise, hugely bettering its 2.45 per cent growth in the previous month.
Tobacco production, the other sub-sector in the positive zone, rose by 4.5 per cent.
The capital goods segment, which denotes investment in industry, contracted by 36.9 per cent in June. It had been hit hard with declines of 64.3 per cent and over 90 per cent, respectively, in the previous months. With this, production in the category saw its 17th consecutive monthly decline.
Policymakers fear that as the government has exhausted its options of opening up even more sectors by easing foreign direct investment flows, capital goods production might take time to recover.
Consumer durables remained a drag among user-based industries, recording a 35.5 per cent fall, though recovering from May’s 68.5 per contraction. The data from the beginning of the year showed that the production of consumer durables was falling even before the Covid-19 crisis, with June being the 11th month of contraction.
Consumer non-durables, which include many essential items, again entered the growth charts in June, rising 14 per cent. It had seen the narrowest contraction of 11.7 per cent in May.