Hope of recovery as core sector fall narrows to 0.8% in Sept vs 7.3% in Aug

The core sector declined 14.3 per cent in the first six months of the current financial year against 1.3 per cent growth in the entire 2019-20.
Output in the crucial eight-industry core sector contracted for the seventh month in a row, but the unlocking of the economy reduced the rate of decline to a mere 0.8 per cent in September against 7.3 per cent in the previous month. 

Coal, electricity, and steel, which constitute over half the core sector index, showed a rise in production in September. 

Coal output grew for the second month in a row with the growth rate accelerating to 21.2 per cent against 3.6 per cent in August. 

This is likely to have a positive impact on the index of industrial production (IIP), which declined for the sixth straight month at 8 per cent in August. The core sector has a 40 per cent weighting in the IIP. 

Some experts say the IIP may show a moderate growth rate in September after declining for six straight months. 

“With the shrinking of the contraction in core sector output, and the growth displayed by both auto production and non-oil exports, the IIP may well be able to exhibit small growth in September,” ICRA Principal Economist Aditi Nayar said. However, she sounded cautious on over-interpreting the data. 


“While many lead indicators have displayed signals of a strengthening economic recovery in September, we caution the sustainability of the upturn may not be universal, and await signs of its durability,” she said.

The core sector declined 14.3 per cent in the first six months of the current fiscal year against 1.3 per cent growth in 2019-20. Five segments showed a fall in production in September against six in August. However, there are some changes in them in this regard. Fertiliser sales, which had been rising since May despite lockdown, fell 0.3 per cent in September. 

On the other hand, electricity generation, which had been contracting since March, rose 3.7 per cent in September. Steel production showed a small growth rate of 0.9 per cent in September against a 1.7 per cent fall in the previous month. 

This, together with a decline in contraction in cement output to 3.5 per cent in September against 14.5 per cent in August, showed that construction activities are picking up pace. On the other hand, the decline in natural gas production accelerated to 10.6 per cent from 9.5 per cent in this period, while crude oil continued to contract at elevated levels – 6.3 per cent vs 6 per cent. Refinery production saw the fall coming down to 9.5 per cent against 19.1 per cent.



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