Shrinking of Core Sector Output
Data released by the industry department showed that in the output of eight core sector industries shrank for the fourth straight month in June 2020.
• The core sector industries constitute 40.27% of the Index of Industrial Production (IIP).
• There are eight core sector industries, namely coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity.
• The decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.
During April-June FY21, the total output of core sector's output fell 24.6% as compared to a positive growth of 3.4% in the same period previous year.
The core sector industries shrunk 15% in June, against 22% in May, with cement (-6.9%), refinery products (-8.9%) and steel (-33.8%) recording an improvement from the previous month, even as electricity (-11%), natural gas (-12%) and crude oil (-6%) displayed muted pickup.
Of the eight core sectors, the fertilizer 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 International Monetary Fund (IMF) has estimated Indian economy to contract by 4.5% in FY21, while Goldman Sachs expected the June quarter to be the worst, with GDP shrinking by 45% as business activity came to a standstill for at least two months due to stringent lockdown measures.
Data released by the Controller General of Accounts (CGA) showed the Centre exhausted 83.2% of fiscal deficit in the first quarter (April-June) of FY21 against 61.4% during the same period a year ago.
The core sector overall shrunk sharply for the fourth straight month but the pace of slowdown has also reduced. This shows an uneven return to normal manufacturing activity since the lifting of the nationwide lockdown on 1 June. But, to overcome the issue government officials should announce a new fiscal stimulus package as soon as possible.