NEW DELHI: The economic slowdown is showing no sign of abatement, as the output of eight core infrastructure industries shrank 5.8 per cent in October, their worst performance in a decade, with six of the eight sectors contracting, and experts see no silver lining.
Government data released on Friday reveals that coal production fell steeply, by 17.6 per cent, crude oil by 5.1 per cent, and natural gas by 5.7 per cent.
Production of cement contracted by 7.7 per cent, of steel by 1.6 per cent, and of electricity by 12.4 per cent, mainly due to sluggish economic activity.
Even growth in the output of refinery products slowed down to 0.4 per cent in October as against 1.3 per cent in the same period last year.
The only sector that posted growth in October was fertilizers, where production increased by 11.8 per cent year-on-year.
The eight core sectors had expanded by 4.8 per cent in October 2018.
During the April-October period, the growth of core industries fell to 0.2 per cent against 5.4 per cent in the year-ago period. This is the third month in a row when the core infrastructure sector has contracted. The output of the eight core infrastructure industries had contracted by 5.1 per cent in September.
“Economic growth may have slowed but there is no recession, there can be no recession,” Finance Minister Nirmala Sitharaman had said in the Rajya Sabha earlier this week.
However, economists see no immediate sign of recovery, unless the government pumps money into the system.
“With the just-released index of eight core industries falling 5.8 per cent in October, bottoming out of growth could be further down the road and recovery is unlikely to be V-shaped as consumer demand, credit supply and risk appetite remain lacklustre,” said Sreejith Balasubramanian, economist, IDFC.
The recovery, they claim, will depend on government support.
“Growth in the second half of the year could remain evasive unless the government pumps in more stimulus and continues its growth push through the fiscal year. The grind is going to be slow and heavily dependent on fiscal support to come out of the current growth recession,” said Rajni Thakur, economist, RBL Bank.
Meanwhile, the market benchmark BSE Sensex tumbled 336 points on Friday as investors turned jittery ahead of the release of GDP data.
Commenting on the data, ICRA Ltd said based on the unfavourable performance of the core sector, the contraction in the IIP appears set to deepen in October 2019.
“The sharp worsening in the performance of electricity generation and cement in October 2019 offset the sequential improvements in refinery production, fertilisers and coal, resulting in an even deeper contraction of the core sector output in that month,” it said in a statement.