March core sector output slumps 6.5%
Sharper contraction likely in IIP
- Output at India’s core sector contracted by 6.5% in March, reflecting the early impact of the COVID-19 pandemic and the subsequent nationwide lockdown.
- The index of eight core sector industries, which form 40% of the weight of items included in the broader Index of Industrial Production (IIP), reflected a contraction in key parts of the economy in March.
- The core sector data signalled a much sharper contraction in the wider IIP, especially in April, as several core sector industries were actually exempted from the lockdown.
Steel declines 13%
- Leading the contraction at the core industries were a 13% decline in steel output, and a 7% fall in electricity generation.
- The two sectors account for almost 40% of the index. Cement production crashed 25%, while natural gas production slid 15%, the data showed. Fertiliser production also fell 12%, while crude oil production slipped 5.5%.
- Coal was the only core sector which saw some growth, with output up 4%. The largest component of the index — refinery production — also dipped by only 0.5%.
- Several of the core sector industries were given exemptions under the lockdown. Electricity and steel are continuous processes and have not been stopped.
- But movement of goods faced major restrictions, so it could be that they reduced production as much as possible to deal with reduced demand.
- Coal may dip for April, while cement production will fall sharply as all construction activity came to a halt.
The wider IIP will see a much bigger hit, as non-essential industries were completely closed in April. The core sectors account for about 40% of the IIP, but I’d say about 45% of all industries will show zero production.