NEW DELHI: Despite relaxation in lockdown measures, output of the eight core industries contracted 15% in June. However, the latest dip has a silver lining as it is lower than that of the previous two months — 22% contraction in May and 37% in April, signalling uneven recovery in manufacturing activity.
According to economists, the improvement was mainly because of relaxation in lockdown and improvement in economic activities. Industrial activity is expected to pick up pace going forward with more relaxations coming into play.
“The slightly positive factor is that the decline in growth has improved,” said Madan Sabnavis, chief economist, CARE Ratings. Performance of the eight core industries — electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers — is crucial as they account for 40.27% in the Index of
Industrial Production (IIP). So, any contraction in core sector output will also drag down the IIP numbers.
Sectorwise data showed all sectors, barring fertilizers, showed negative growth, with the steel sector showing the steepest contraction at 33%. Coal contracted by 15.5%, natural gas by 12%, electricity 11% and crude oil 6%, while refinery products, which weigh 28.02% of the IIP, witnessed an 8.9% contraction.
Cement production, though, showed sharp uptick from 85.3% contraction in May to a negative growth of 6.9% in June. This shows progress in construction activity, which is a key indicator of the health of the infrastructure sector.
However, not all experts are as optimistic. “With virus cases still rising, many restrictions will remain for an extended period. The upshot is that the recovery in Indian industry is likely to be slow and bumpy,” said Darren Aw, Asia economist at Capital Economics.