The Index of Industrial Production (IIP) contracted for the second successive month in Feb-21. Posting an annualised de-growth of -3.6%, it marks the weakest pace of expansion in 6 months.
Download ReportIndia Feb 21 IIP - Adds to the gloom
While a negative IIP growth did not come as a surprise, the Jan-Feb-21 IIP prints put together with the rise in COVID cases and localised lockdowns is somewhat disturbing. After a strong rebound in Q3 IIP growth to +1.5%YoY (-5.6% in Q2) led by pent-up and festive demand and improved mobility, the decline in IIP momentum over Jan-Feb looks set to get extended well into Q1 FY22. This however may not translate into headline growth which is expected to find support in an exceptionally favourable base induced from last year’s complete lockdown. As such, annualized IIP readings Mar-21 onwards will look perked up well into H1 FY22. Further, in comparison to Q1 FY21, the effect of containment measures on industry growth is expected to be limited, as we argue in our report below.