What’s unsaid in the April IIP figures

The National Statistical Office (NSO) released quick estimates for the Index of Industrial Production (IIP) for April 2020 with the caveat that they must not be compared with the previous months’, as they are thinly estimated based on low response rates in view of the lockdown. April’s estimates – of IIP at 56.3, mining at 78.3, manufacturing at 45.1, and electricity at 126.1 – do not reveal much information on the plight of the industrial sector in the month that saw the most stringent lockdown in India.

The estimates for March, however, were revised to an 18.3% contraction in industrial output (against 16.7% earlier), with manufacturing plunging the most by 22.4%.

That said, a few inferences could be drawn using data from other sources:

• Core infrastructure sector¹ data released earlier saw output falling 38.1% on-year in April, led by sharp contraction in steel (-84%) and cement (-86%) sectors, followed by refinery products (-24.2%), electricity (-22.7%) and coal (-15.4%)
  
• Within manufacturing, sectors such as textiles, engineering goods, gems and jewellery, leather, and petroleum products suffered massive declines on the exports front. With the lockdown and domestic demand drying up, these have faced a double whammy. Others like automobiles too have faced a blow, as plants were shut and there were practically no sales (except tractors), signalling low production in subsequent months. The Purchasing Managers’ Index (PMI) for manufacturing fell to an all-time low of 27.4 for April, while railway freight cargo transport (categorised as an essential service), though operational, fell 35.3%
  
• For a better view of how industrial output might look like in April, we also delved into cross-country data. The chart below shows severity of lockdown vs industrial output for a few countries. This suggests that in the months when lockdowns were most severe or implemented widely, industrial production across countries fell in the range of -11 to -60%. Philippines, where stringency² conditions are more comparable to India’s, saw IIP fall 60%
  

¹ The core infrastructure sector index comprises indices for coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, and has 40.3% weight in IIP
² Oxford Covid-19 Government Response Stringency Index constructed by Hale, Thomas, Sam Webster, Anna Petherick, Toby Phillips, and Beatriz Kira shows India and Philippines experiencing the severest lockdown in April