Official statistics relating to production of eight core sector industries indicates that June 2020 did distinctly better than its preceding month.
The combined output of eight core sector industries – coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity – declined by 15 per cent in June 2020. This performance, though dismal in the absolute sense, was definitely an improvement over May 2020 when such output was down by a steeper 22 per cent and over April 2020 when output had slumped by as much as 37 per cent.
June 2020 was the fourth straight month of declining core sector output, but also the third consecutive month of recovery.
June 2020 was the fourth straight month when core sector production was lower than the comparable levels of the previous year. With the result, the Index for Core Sector Industries was down 24.6 per cent in the first quarter (April to June) of FY21. This was against a 3.4 per cent growth recorded in the first quarter of FY20.
Industry-wise performance in FY21Q1
During the first quarter of FY21, fertilizers was the only industry to have shown year-on-year growth. Production of fertilizers was up 2.8 per cent in the April-June quarter of FY21. However, this should be seen against the fact that fertilizer output was down 1.1 per cent in the same period of FY20. Thus, this industry did have the advantage of a “low base” effect. The fertilizer industry has a weight of just 2.63 per cent in the overall Core Sector Index. Hence, the positive performance of this industry could have any significant impact on the overall Index.
| Performance of Eight Core Sector Industries | ||||||||
| Sector | Weight (%)* | Weight in IIP (%)** | FY17 | FY18 | FY19 | FY20 | April-June | |
| FY20 | FY21 | |||||||
| Coal | 10.33 | 4.16 | 3.2 | 2.6 | 7.4 | -0.4 | 2.6 | -15.0 |
| Crude Oil | 8.98 | 3.62 | -2.5 | -0.9 | -4.1 | -5.9 | -6.8 | -6.5 |
| Natural Gas | 6.88 | 2.77 | -1.0 | 2.9 | 0.8 | -5.6 | -1.0 | -16.2 |
| Refinery Products | 28.04 | 11.29 | 4.9 | 4.6 | 3.1 | 0.2 | -2.4 | -18.2 |
| Fertilizers | 2.63 | 1.06 | 0.2 | 0.0 | 0.3 | 2.7 | -1.1 | 2.8 |
| Steel | 17.92 | 7.21 | 10.7 | 5.6 | 5.1 | 3.4 | 12.4 | -51.7 |
| Cement | 5.37 | 2.16 | -1.2 | 6.3 | 13.3 | -0.9 | 1.0 | -38.3 |
| Electricity | 19.85 | 7.99 | 5.8 | 5.3 | 5.2 | 0.9 | 7.3 | -16.1 |
| Overall | 100.00 | 40.27 | 4.8 | 4.3 | 4.4 | 0.4 | 3.4 | -24.6 |
| *Gives relative weight of the sector within the Core Sector Index | ||||||||
| **Gives absolute weight of the sector in the Overall Index of Industrial Production (IIP) | ||||||||
Electricity generation was down 16.1 per cent and refinery production was 18.2 per cent. Together, these two sector account for nearly 40 per cent weight in the overall Core Sector Index. Steel, with a weight of 18 per cent in the overall Core Sector Index, saw its production decline by a steep 51.7 per cent in the first quarter of FY21.
The eight core sector industries account for 40.27 per cent weight of the overall Index of Industrial Production. Hence, the performance of these core industries is considered as a forerunner to that of the overall industrial sector.
It must be mentioned that the Core Sector Index enjoys a “time advantage” in terms of release. For instance, the Core Sector Index for June 2020 was made available on July 31, 2020 while the Overall Index of Industrial Production (IIP) is scheduled for release on August 11, 2020.