The output of eight core sector industries shrank for the fourth straight month in June 2020, although the contraction eased to 15%, showing some recovery from the 22% fall in May, according to data released by the Commerce Ministry on Friday. Economists expect the negative trend to continue for at least two more months.
During April-June 2020-21, the sector’s output dipped by 24.6% as compared to a positive growth of 3.4% in the same period previous year.
Monsoon boost
Of the eight core sectors, the fertiliser industry was the only one which saw actual growth in June, with output rising 4.2% in comparison to June 2019. This, however, is lower than the May 2020 growth of 7.5%, but reflects the positive outlook in the agriculture sector where a normal monsoon is leading to expectations of a bumper kharif crop.
The remaining industries showed contraction, with the steel sector continuing to remain the worst performer, with a 33% drop in production in comparison to the previous year. Cement production fell almost 7%, albeit an improvement from the 22% contraction seen in May.
The energy sectors also showed negative growth, with coal production falling 15.5% and crude oil and natural gas production dropping 6% and 12% respectively.
Refinery squeeze
Petroleum refinery production, which carries the greatest weight in the core sector index, saw a contraction of almost 9%, while electricity generation dropped 11%.
“The daily mobility and power indicators do show sequential improvement in May and June, but it is now plateauing out in July, so it is hard to predict when sluggish economic activity will recover,” said India Ratings chief economist D.K. Pant.
“The national lockdown may have been lifted, but several States have announced their own lockdowns till the end of August, and even globally, we are seeing a second wave of infections,” he said.
