The latest data on output at the eight core industries point to tentative signs that the pandemic-spurred economic contraction may have begun to bottom out. Commerce Ministry provisional figures show that while overall production at the infrastructure industries extended their year-on-year decline to a fourth straight month in June, shrinking 15%, the pace at which activity contracted slowed for a second consecutive month following April’s precipitous 37% plunge. The sector-wise performance also affirms that the gradual reopening since June appears to have helped tease back some smattering of demand in the economy. Of the seven industries that extended their contractions, only coal shrank at a faster pace (-15.5%) than in May, when production had declined 14%. Refinery products, the largest weight on the index contributing 28%, shrank 8.9% marking an improvement from the 21.3% contraction seen the previous month. The lifting of restrictions on inter and intra-State movement of persons and goods revived both vehicular movement and, consequently, demand for auto fuels. With personal modes of mobility preferred given the fear of infection, petroproduct consumption grew 11% month-on-month in June. Electricity output too fell at a slower 11% pace than the preceding month’s 14.8% slump, again signalling an uptick in demand from some manufacturing clusters including in western and northern India.
Among the other sectors, while steel production continued to tumble — output shrank by more than a third (-33.8%) from June 2019 — cement appeared to have put the worst behind as urban construction and projects under the rural job guarantee scheme spurred demand. Cement output fell 6.9%, a sharp deceleration in the pace of decline from May’s 21.4% contraction. Fertilizers, the only industry to post growth for a second straight month, however, saw the expansion ease to 4.2%, from 7.5% in May. Still, with monsoon activity above normal so far this year, kharif sowing was almost 14% higher as on July 31 than at the same time in 2019. With the IMD forecasting above average rainfall in August and September as well, the outlook for the agriculture-reliant rural economy is far more promising than for most other sectors. To be sure, the economy is still a fair distance from a sustained turnaround with other data flagging the risks to a recovery. For one, the significant shortfalls in GST collection point to the difficulties the central and State governments are facing in garnering crucially needed revenue. This has already swelled the fiscal deficit at the end of the first quarter to 83% of the full year’s target. With the new infections curve showing no signs of plateauing as yet, policymakers have the unenviable task of stemming the COVID-19 tide without dampening economic momentum.