Mining activity also fell by 13 per cent, lower than June's 19.8 per cent. Meanwhile, electricity generation continued to see a lower decline at 2.5 per cent, down from the relatively modest 10 per cent fall in June, as domestic demand rose.
All but two of the 23 sub-sectors within manufacturing
posted a year-on-year contraction, same as the previous month. Buoyed by drug exports and orders for sanitizers and protective gear, pharmaceutical production posted 22 per cent growth, as against 34 per cent growth in the previous month. The only other growth puller, tobacco production, rose 6 per cent.
The crucial capital goods segment, which denotes investment in industry, contracted 22.8 per cent in July. With this, production in the category saw its eighteenth consecutive monthly decline. While contraction had moderated to 37.4 per cent in June, the segment had seen production almost wiped out with a 90 per cent fall in April. 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 demand struggles
remained a major casualty of the pandemic among user-based industries, recording a 23.6 per cent fall, down from June's 35.5 per cent slide. Data from the beginning of the year showed that production of consumer durables
was falling even before the Covid-19 crisis, with July being the twelfth month of contraction. Consumer non-durables, which include many essential items, lost its initial growth spurt, registering a 6 per cent rise after June's 14 per cent.
“We will continue to see an improvement in segments like consumer non-druables, including the pharma segment. However, a sustained improvement in other components such as consumer durables
and capital goods will require consumer and business sentiments to improve,'' said Rajani Sinha, chief economist at Knight Frank India.
However, among user-based industries, the biggest pick-up was witnessed in infrastructure goods. The contraction in the segment almost halved for the third month in a row to 10.6 per cent in July, down from 18.8 per cent in June, driven by cement and steel.
Madan Sabnavis, chief economist at CARE Ratings, expects IIP
growth to be negative, albeit to a lesser extent, in August, while September may come closer to zero, given the pick-up in human movement, which will boost pre-festival sales.
Nayar said available indicators for August provided mixed cues, with a base effect-led improvement in sectors such as coal and rail freight, modest recovery in petrol consumption, port cargo traffic and GST e-way bills, juxtaposed with a worsening pace of contraction of electricity generation and diesel consumption.
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