India has seen the sharpest fall of 55.5% in industrial production due to the lockdown. Index of Industrial Production (IIP) has already contracted by 18.3% in March 2020. According to the ministry of statistics and program implementation, it will not be appropriate to compare the IIP of the month of April with previous months as the industries have reported zero production in that month due to the nationwide lockdown to curb the spread of coronavirus. Soon there might be some changes done to IIP in the coming months. Therefore, these estimates will be revised subsequently according to the changes in IIP policy.
But at the same time, experts challenged this view. They believe that in order to understand the impact that lockdown has on various of the economy, it is necessary to look into these figures. It is even important for the forecasting done for the recovery of the economy in the coming years.
Manufacturing firms hit the ground as they were not operating in April. Their output fell by 64.2. Manufacturing accounts for a major share of 78% of the IIP which is one of the reasons for falling IIP. A report shared by CARE ratings showed that during April, 12 industries that included furniture, leather, tobacco, vehicles, manufactured metal and electrical equipment registered a contraction greater than 90%.
The capital good sector had shrunk by more than 90%. This sector represents an investment in the industry. Production remained to be of concern for the 15th straight month under this sector. Among all, the consumer durables category was the biggest lockdown casualty which reported a 33% decrease in its production. Even before Covid-19 hit India, the demand for consumer durables had started to fall.
According to the estimates released by Standard and Poor, the Indian economy will contract by 5% in FY21. This Wednesday, the Organization for Economic Co-operation and Development (OECD) announced that the economy of India can contract by 7.3% in FY21.