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Wednesday, June 16, 2021

July core sector shrinks 9.6% versus 12.9% contraction in June

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The infrastructure sector shrank for the fifth straight month in July, though the rate of decline slowed as further easing of restrictions lifted economic activity, data released on Monday showed.

The index of eight core infrastructure sectors dropped to 9.6% in July from a year ago compared to a 12.9% contraction in June, suggesting industrial production may contract again in July.

The eight infrastructure industries in the index – coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity – together have a 40% weight in the Index of Industrial Production (IIP). The production of eight core sectors had expanded 2.6% in July 2019.

“Its cumulative growth during April to July, 2020-21 was -20.5%,” commerce and industry ministry said in a release. It had declined 22% in May and 37.9% in April.

“Core sector growth for July has followed a predictable pattern which was witnessed since May. The growth rate remains negative but is an improvement over the previous month,” said Madan Sabnavis, chief economist, CARE Ratings.

India’s factory output contacted for fourth month in a row in June at 16.6%. CARE Ratings expects 12-14% decline in industrial production in July.

Infra

Fertiliser production grew 6.9%, faster than 4.2% in June on the back of high demand from agriculture along with replacement of stocks in advance for rabi sowing in October-November.

The pace of contraction slowed in coal, crude oil, natural gas, steel and electricity. Electricity output contracted 2.3% while coal production shrank 5.7% after double-digit contraction in April-June, reflecting the resumption of industrial and business activity leading to pick up in commercial demand.

Refinery production fell at a steeper rate of 13.9% in July compared with 8.9% drop in June while cement output fell 13.5% in July, almost double the 6.8% contraction in previous month. Refinery products registered -13.9% degrowth mainly due to lower demand in domestic and global markets.

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