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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.

Source: TH

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