Professor of Economics,
University of Kolkata
Kolkata, West Bengal, India
GLARiUS Markets Intelligence (www.glarius.com) provides tools, prognoses and graphs to monitor performances of economies, countries and stock markets worldwide.
A deep decline of production of all industries as appeared during the lockdown of the domestic economy in the wake of the outbreak of COVID-19 witnesses a clear supply shock in the macro economy in India (Figures 1 and 2). The sharpest supply shock was witnessed during April, 2020, when the iip declined by more than 57 per cent for all industrial products. The highest decline was registered in motor vehicles (-99.6 per cent) and the lowest decline in food products industries (-24.6 per cent) during this month as compared to April, 2019. In use base classification, manufacturing of consumer durables was the worst affected sector showing -96 per cent growth followed by capital goods ( -92.6 per cent) and infrastructure (-84.7 per cent). De-growth of capital goods, and infrastructure goods is an indicative of fall in investment demand because of the pandemic. The decline of production of primary goods was the lowest (-26.6 per cent) in April, 2020.
In the manufacturing sector, motor vehicles, furniture, machinery, electrical equipment, computers and electronics, fabricated metal products, wood, paper, leather, textiles, readymade garments, and beverages and tobacco contributed to approximately 40 per cent of the total fall of industrial output in April 2020 (Table 2, GOI: Macroeconomic Report, June 2020). Production of electricity declined by 23 per cent during this month despite it was exempt in the lock-down, may be because of fall in demand for power in the industrial sector.
Figure 1 Annual growth of industrial production by major sectors
Figure 2 Annual growth of industrial production by use base category
Average annual growth rates, calculated from iip new series (2011-12), before lockdown period and during lockdown period are displayed in Table 1. The period from April 2012 to February 2020 is treated here as pre-lockdown period and March to May, 2020 as the lockdown period. Industrial output grew at around 3.5 per cent (year on year basis) during pre-lockdown period, and the growth rate was declined to -36.9 per cent during lockdown (Table 1). Production of electricity exhibited the highest growth rate among different industry groups in the pre-lockdown period. Manufacturing production is the worst affected sector because of lockdown. In use base classification, production of consumer non-durable goods grew at the highest rate (5.2 per cent) per year during April 2012 to February 2020. Capital goods sector was the bad performer exhibiting negative growth even before the lockdown period. Mining and quarrying activities, were exempt during the lock-down, thereby entailing a relatively lower negative contribution. In lockdown, production of consumer durable goods and capital goods declined at significantly higher rates as compared to the other sectors in use base category in industrial production (Table 1).
Table 1 Average annual growth# rates of industrial production
Industry group (sectoral division) |
Pre-lockdown period* |
Lockdown period** |
|
Mining |
1.24 |
-16.46 |
|
Manufacturing |
3.64 |
-42.95 |
|
Electricity |
6.18 |
-15.53 |
|
All industry |
3.53 |
-36.88 |
|
Manufacturing group |
|
|
|
Food products |
3.36 |
-19.25 |
|
Beverages |
1.67 |
-60.74 |
|
Tobacco products |
1.33 |
-58.28 |
|
Textiles |
2.14 |
-61.30 |
|
Wearing apparel |
7.24 |
-58.71 |
|
Leather products |
3.14 |
-57.89 |
|
Wood products |
2.32 |
-63.73 |
|
Paper products |
-0.58 |
-51.72 |
|
Printing |
-0.44 |
-49.98 |
|
Petroleum products |
3.18 |
-18.19 |
|
Chemicals |
2.49 |
-33.09 |
|
Pharmaceutical |
11.35 |
-24.65 |
|
Rubber and plastics products |
0.61 |
-44.13 |
|
Non-metallic mineral products |
2.93 |
-45.26 |
|
Basic metals |
6.42 |
-44.91 |
|
Fabricated metal products |
-0.18 |
-61.89 |
|
Computer and electronic products |
6.64 |
-71.55 |
|
Electrical equipment |
1.75 |
-65.80 |
|
Machinery and equipment |
1.87 |
-63.41 |
|
Motor vehicles |
1.13 |
-76.45 |
|
Other transport equipment |
4.57 |
-64.97 |
|
Furniture |
11.22 |
-55.89 |
|
Other manufacturing |
-0.11 |
-65.37 |
|
Industry group (use based) |
|
|
|
Primary goods |
3.16 |
-16.91 |
|
Capital goods |
-0.02 |
-65.07 |
|
Intermediate goods |
4.44 |
-42.66 |
|
Infrastructure and construction goods |
4.41 |
-50.65 |
|
Consumer durable goods |
2.84 |
-66.98 |
|
Consumer non-durable goods |
5.22 |
-26.87 |
Note: #Growth rate,
* April 2012 to February 2020, ** March 2020 to May 2020
Source: Author’s estimation by using monthly iip 2011-12 series, NSO
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Manufacturing is the worst affected sector among different industrial sectors in India, but all manufacturing groups have not been affected equally because of the outbreak of COVID-19. The middle part of Table 1 compares average growth rates of production from different manufacturing groups at 2 digit NIC before lockdown and during lockdown period. Manufacturing of pharmaceuticals was the best performer among the 2 digit manufacturing groups followed by manufacture of furniture showing above 11 per cent growth rate before March 2020. However, some manufacturing groups like paper products, printing materials and fabricated metal products exhibited negative output growth during this period. Growth rate of output for every manufacturing group was negative during the lockdown. Production of motor vehicles declined at the fastest rate (more than 76 per cent) during lockdown period. Total sale of automobiles declined nearly to 0 in April 2020 and registration of motor vehicles declined by around 90 per cent in May, 2020 comparing to the same month in 2019 (GOI 2020, Macroeconomic Report June 2020). Other manufacturing groups affected highly exhibiting de-growth at more than 60 per cent are computer and electronic products, electrical equipment, transport equipment, wood products, machinery and equipment, fabricated metal products and textiles in this period. Production of petroleum goods declined by 18 per cent during lockdown.
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