Industry

Core sector contraction widens to 2.5%

Power surge: Electricity output rose by 10.5%, marking the second successive month of growth.   | Photo Credit: C.VENKATACHALAPATHY

Output at India’s eight core sectors shrank 2.5% in October with the contraction widening from September’s revised 0.1% decline as steel production slid again after a brief revival in the preceding month.

Steel output, which has an almost 18% weight in the index and had recovered for the first time since March to record 2.8% growth in September, slipped back last month to register a 2.7% contraction.

Cement, however, saw production rise for the first time since February, posting an increase of 2.8%, and along with the positive growth in the output of fertilizers, electricity and coal helped slow the pace of overall contraction.

Electricity generation rose by a strong 10.5%, marking the second successive month of growth after rising 4.8% in September, as per revised data. Between March and August, electricity generation had consistently declined.

Coal production grew for the third straight month, rising 11.6% in October. Still, economists said the data reflected a weakness in underlying economic activity.

‘Recovery still weak’

“Core sector data suggests the industrial recovery is still weak and the traction seen in the index of industrial production growth lately is triggered largely by the festival demand,” noted Sunil Kumar Sinha, principal economist at India Ratings and Research.

The core sectors account for about 40% of the Index of Industrial Production (IIP) and Mr. Sinha expressed concern that all core sectors, barring fertilizers, had seen negative growth in the first seven months of 2020-21.

Output of fertilizers, one of the few sectors to record consistent growth through most of the lockdown months, surged 6.3% in October after a marginal 0.3% decline in September.

Oil sector drags

Refinery products contracted for an eighth month, falling 17%, natural gas output shrank 8.6% and crude oil production fell 6.2% in October, continuing a sustained period of decline.

Updated data for September suggests output shrank just 0.1%, from the 0.8% estimated originally. Similarly, the contraction in July, at 7.6%, was marginally narrower than an 8% estimate.

“Given the 2.5% drop in core industries’ output for October and a sharp 13% drop in consumption in the second quarter... a meaningful recovery in the third quarter looks doubtful,” said Binod Modi, head of strategy at Reliance Securities.

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Printable version | Jan 25, 2021 1:56:37 PM | https://www.thehindu.com/business/Industry/core-sector-contraction-widens-to-25/article33195916.ece

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