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Core Sector output – June Trend | IMF comments

Core Sector output

The eight industries in the IIP index are coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity. These together have a 40 per cent weight in the Index of Industrial Production (IIP).

June’s trend:

The index of eight Core Sector output industries dropped 15 per cent in June compared to a 22 per cent decline in May. It had declined 37 per cent in April. This is the fourth consecutive month of contraction in the core sector output. The core sector contracted by 15%, against 22% in May.

  • Fertilizers (4.2%) remained the only sector to record positive growth due to the ample rainfall and a brisk start to kharif sowing in June.
  • Steel is the worst performing sector: Construction activity has resumed at a faster pace in rural areas relative to urban areas, and that production of consumer durables continues to lag.
  • Cement (-6.9%), refinery products (-8.9%) and steel (-33.8%) recording an improvement from the previous month
  • Electricity (-11%), natural gas (-12%) and crude oil (-6%) displayed negligible rise.
    • Electricity production remaining negative reflects low industrial activity as commercial demand has been low due to the massive adoption of work-from-home practices, and only partly running of factories. 
    • Low crude oil prices and low demand for fuel also kept production and imports low.

Data separately 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.

Due to the fiscal support announced under the “Aatmanirbhar Bharat Abhiyan” Centre’s fiscal deficit may surge to 13 trillion in FY21 from the budgeted level of 8 trillion.

IMF comments:

  • The International Monetary Fund (IMF) said all these factors signal falling economic activity in India as the positive impact from unlock is not as strong as the negative impact of the lockdown. 
  • It urged the government to urgently contain the spread of the coronavirus pandemic on a priority to make economic recovery sustainable.

In the last few weeks, government officials have signalled that the announcement of a new fiscal stimulus package is only a matter of time.