Nomura in a report has said that Indian industrial production has witnessed a faster growth of 11.5 per cent year-on-year (YaY) in July, better than expected; however, industrial recovery is still uneven as per the sector-wise analysis.
Economists of Nomura in the report observed that on a sequential basis, the underlying growth registered the positive momentum in the month of July, amid the recovery sign in the economy, after the second COVID-19 wave.
Talking about the major areas of revival, the economists wrote that it was infrastructure, capital goods, construction output growth, machinery and equipment segments, and especially electrical.
All these show a revival in investment demand. However, consumer output growth is behind it. Customer non-sturdy output development contracted both successively and on a YoY premise, reflecting lower pharma, therapeutic and herbal items. What's more, while purchaser strong yield development rose firmly on a YoY premise (20.2 per cent), it stays negative contrasted with its two-year prior levels (- 8.3 per cent).
According to report, the manufacturing is a matter of concern, amid the possible third wave of Coronavirus.
The moderation is at 52.3 in August from 55.3 in July, according to the Purchasing Managers Index data. However, if anything is less than 50 on the index, it is considered as a contraction. A major reason mentioned by Nomura reported from several auto firms. These auto companies cut down the production in the month of August and September on account of shortages in chips and other parts as well.
Nomura said, outside the inventory or supply bottlenecks, domestic demand stays upheld by ultra-accommodative money-related conditions, rising vaccinations pace, and COVID-19 pandemic under control (for the present). We anticipate that GDP growth should bounce back by 5.0 per cent QoQ, sa, in Q3 (Jul-Sep), albeit the YoY rate will direct to 7.3 per cent, from 20.1 per cent in Q2, because of base impacts.