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IIP grows exponentially in Apr’21 on low base…

…and May’21 may see similar high YoY growth

* IIP grew 134.4% YoY in Apr’21, led by a very low base of -57.3% YoY in Apr’20. This is better than both our expectation and the Bloomberg consensus of 122.3% YoY and 121.1% YoY, respectively. Adjusted for the base, IIP grew 38.6% YoY in Apr’21, against decline of 27.1% YoY in Apr’20. Notably, IIP numbers have been revised up to -0.6% YoY (from -0.9% YoY) for Jan’21 and to 24.1% YoY (from 22.4% YoY) for Mar’21.

* Manufacturing grew 197.1% YoY, Mining 37.1% YoY, and Power Generation 38.5% YoY in Apr’21. Notably, (a) manufacturing activity declined 12.6% MoM in Apr’21 (v/s +10.8% MoM in Mar’21), (b) mining activity contracted more than a fifth sequentially in Apr’21 (v/s +17.6% MoM in Mar’21), and (c) power generation contracted relatively slower at 3.3% MoM in Apr’21 (v/s +17% MoM growth in Mar’21).

* Among the use-based categories, capital goods production saw the highest sequential decline of 23.5% MoM in Apr’21 vis-à-vis growth of 14.9% MoM in Mar’21. This was followed by infrastructure/construction, with decline of 15.1% MoM in Apr’21 v/s 14% MoM growth in Mar’21. All other components declined in the range of 11–13% MoM in Apr’21.

* As a result of the nationwide lockdown, zero to minimum economic activity was reported over Apr–May’20. Consequently, YoY growth figures over Apr–May’21 were expected to be exponential. However, as the second COVID wave peaked out in May’21 and states imposed localized lockdowns, economic activity in May’21 remained subdued. Therefore, although YoY growth may be very high, May’21 may see sequential decline, just as in Apr’21 (as suggested by our EAI as well).

* IIP grew a whopping 134.4% YoY in Apr’21…: IIP grew 134.4% YoY in Apr’21, led by a very low base of -57.3% YoY in Apr’20. This is better than both our expectation and the Bloomberg consensus of 122.3% YoY and 121.1% YoY, respectively. Adjusted for the low base, IIP grew 38.6% YoY in Apr’21, against decline of 27.1% YoY in Apr’20 (Exhibit 1). Notably, IIP numbers have been revised up to -0.6% YoY (from -0.9% YoY) for Jan’21 and to 24.1% YoY (from 22.4% YoY) for Mar’21.

* …supported by a low base across the board: Manufacturing grew 197.1% YoY, Mining 37.1% YoY, and Power Generation 38.5% YoY in Apr’21 (Exhibit 2). Interestingly, (a) manufacturing activity declined 12.6% MoM in Apr’21 (v/s 10.8% MoM in Mar’21), (b) mining activity contracted more than a fifth sequentially in Apr’21 (v/s 17.6% MoM in Mar’21), and (c) power generation contracted relatively slower at 3.3% MoM in Apr’21 (v/s 17% MoM growth in Mar’21) (Exhibit 3).

* All use-based components saw sequential decline in Apr’21: Capital goods production saw the highest sequential decline of 23.5% MoM in Apr’21 vis-à-vis growth of 14.9% MoM in Mar’21. This was followed by infrastructure/construction, with decline of 15.1% MoM in Apr’21 v/s 14% MoM growth in Mar’21. All other components declined in the range of 11–13% MoM in Apr’21 (Exhibit 4).

* IIP growth would be supported by a low base even in May’21: As a result of the nationwide lockdown, zero to minimum economic activity was reported over Apr–May’20. Consequently, YoY growth figures over Apr–May’21 were expected to be exponential. However, as the second COVID wave peaked out in May’21 and states imposed localized lockdowns, economic activity in May’21 remained subdued. Therefore, although YoY growth may be very high, May’21 may see sequential decline, just as in Apr’21

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