Industrial Output Contracts Slower Indicating Economic Recovery

India’s factory contracted by 8% in August, at slower pace than in July, indicating that economic activity is gradually picking momentum after the government eased the lockdown restrictions. The factory output is measured by the Index of Industrial Production (IIP), which is considered the closest approximation for measuring economic activity in the country. Cumulative growth during April-August was (-) 25%, data released by the statistics ministry showed on Monday. “With the gradual relaxation of restrictions, there has been a relative improvement in the economic activities by varying degrees as well as in data reporting," an official statement said. Manufacturing sector output, which accounts for more than three-fourth of the entire index, registered a decline of 8.6% in August. Mining activity that accounts for over 14% of the index, fell 9.8%. Power output contracted 1.8%. The contraction in capital goods output, an indicator for investment activity, too was softer in July at 15.4% in August, as compared with 28.8% contraction seen in the previous month. Consumer durables output too shrank at a slower pace in August than in July even as it witnessed 10.3% contraction, data showed.