Indian Economy
Core Sector Shrinks by 23.4%
- 01 Jul 2020
- 3 min read
Why in News
According to the data released by the Ministry of Commerce and Industry, the eight core sector industries contracted by 23.4% in May, 2020.
- In April 2020 the eight core sectors had contracted by 37%.
- In May 2019 the eight core sectors had grown by 3.8%.
Key Points
- Core Sector Data: Except fertiliser, all seven sectors — coal, crude oil, natural gas, refinery products, steel, cement, and electricity — had recorded negative growth in May.
- The fertiliser production showed growth at 7.5% after two consecutive months of contraction.
- The steel and cement showed a shrinkage of 48.4% and 22.2% respectively.
- Reason: The main reason for contraction was factories remained affected by a lack of labour and cash shortages owing to the nationwide lockdown.
- Impact: Experts are of the opinion that aftershocks of the lockdown will continue to affect domestic industry in coming months.
- They will see a lower but certain contraction.
Core Sector Industries
- The eight core sector industries include coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity
- These comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
- The eight Core Industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.
| Industry | Weight (In percentage) |
| Petroleum & Refinery production | 28.04 |
| Electricity generation | 19.85 |
| Steel production | 17.92 |
| Coal production | 10.33 |
| Crude Oil production | 8.98 |
| Natural Gas production | 6.88 |
| Cement production | 5.37 |
| Fertilizers production | 2.63 |
Index of Industrial Production
- The Index of Industrial Production (IIP) is an indicator that measures the changes in the volume of production of industrial products during a given period.
- It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
- IIP is a composite indicator that measures the growth rate of industry groups classified under:
- Broad sectors, namely, Mining, Manufacturing, and Electricity.
- Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods.
- Base Year for IIP is 2011-2012.
- Significance of IIP:
- It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc, for policy-making purposes.
- IIP remains extremely relevant for the calculation of the quarterly and advance GDP estimates.
