IIP grows at 0.2% in September, enters positive territory after a six-month contraction

​​​The swift recovery is supported by a turnaround in the core sector output which contracted at it slowest pace this fiscal at 0.8%.

Agencies
Core sector output, which comprises 40.27% of the IIP, showed signs of swift recovery in September.
The September Index of Industrial Production (IIP) showed recovery as it entered positive territory after contracting for a consecutive six months.

For September, IIP grew at 0.2 per cent with both electricity and mining showing positive growth whereas the key category of manufacturing still in the negative zone.

The swift recovery is supported by a turnaround in the core sector output which contracted at it slowest pace this fiscal at 0.8%.


The core sector output forms 40.27% of the IIP.

The RBI in its newly introduced 'nowcast' has predicted a faster than expected recovery backed by strong set of high frequency macro data.

It expects the economy to show growth in the Oct-Dec quarter which is earlier that what was anticipated in the October policy review.
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However, for the second quarter the RBI has forecast the economy to shrink by more than 8%. Combined with the historic contraction of 24% in first quarter, the RBI said that India has entered a technical recession.

The hopes of a swift recovery have showed up in the revised forecasts of other agencies too with Moody's raising its growth forecast for 2020 to -8.9% from -9.6% earlier. It raised the growth forecast on the hopes of more robust economic activity happening due to improving recovery rate for covid cases.

The government's successive push through Atmanirbhar packages will add more strength to the recovery process and the expansion of the production-linked incentive scheme to other areas will provide a much needed boost to manufacturing.

Combined with today's package, the total stimulus is now around 15% of the GDP, making it one of the highest in the world.
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