Eight core sectors contract 2.5% in October

Our Bureau New Delhi | Updated on November 27, 2020 Published on November 27, 2020

The sectors witnessed the decline for the 8th consecutive month

India’s eight key infrastructure sectors contracted for the eighth consecutive month in October, posting a decline of 2.5 per cent (year-on-year), weighed down by a fall in production of crude oil, natural gas, petroleum refinery production, and steel.

The remaining sectors posted an increase in production in October, with coal at 11.6 per cent, fertiliser at 6.3 per cent, cement at 2.8 per cent, and electricity at 10.5 per cent, as per figures released by the Department for Promotion of Investment and Internal Trade (DPIIT).


Hopes of revival

In September, the core sector contraction had narrowed to below 1 per cent giving hopes of resurgence in manufacturing activity and economic revival. The October figures could be disappointing but some economists say that focussing on the profile may throw up a brighter picture.

“There were expectations that the core sector growth rate may turn marginally positive in October. However, it has come in lower at -2.5 per cent against -0.1 per cent in September. However, there is some promise in the profile,” pointed out Madan Sabnavis, chief economist, CARE Ratings.

Coal and power have double digit growth rates reflecting higher economic activity in the month relative to the earlier ones, Sabnavis said.

“Cement growth has turned positive at 2.8 per cent which is encouraging as it reflects work in the real estate and roads sectors. However, it may be mentioned that the government expenditure on roads in the first seven months has been lower than that last year,” he added.

Growth in fertilsers

Growth in fertilisers also continues to be positive at 6.3 per cent which is in step with the rabi sowing that was on which may get diluted going ahead once the sowing is over and the companies stock their inventories.

Negative growth in steel (2.7 per cent) after positive growth last month reflects volatility in production linked with auto and infra sectors, Sabnavis said.

The oil sector continued with negative growth rates as demand remained weak – both domestic and external. Refinery products, with the highest weight (28.04 per cent) in the index, registered the sharpest drop of 17 per cent during the month. It was followed by fall in natural gas production at 8.6 per cent and crude oil at 6.2 per cent.

IIP growth would probably still be negative this month in the region of 0 per cent -1 per cent, Sabnavis said.

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Published on November 27, 2020
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