Only electrical energy and coal confirmed development; ‘IIP may rebound at a modest 0.5-1.5%, trailing October levels’
Output from India’s eight core sectors contracted 1.3% in December 2020, with electrical energy and coal the one two sectors recording constructive development.
This is the third month in a row that core sectors’ output declined, with revised estimates for September 2020 suggesting that output had grown by 0.6% in the month in comparison with provisional estimates of a 0.8% contraction in the month. September’s marginal uptick was preceded by six successive months of contraction in the core sectors.
The Office of the Economic Adviser in the Department of Promotion of Internal Trade and Investment additionally revised upwards the indices for October and November 2020, based mostly on up to date information. Now, the core sectors’ output is estimated to have shrunk by simply 0.9% in October, in comparison with a 2.5% decline estimated earlier.
Similarly, core sector output in November had contracted by 1.4% in comparison with the two.6% dip projected earlier.
Coal output recorded constructive development for the fifth month in a row, albeit at a reasonable 2.2% in December 2020. Electricity manufacturing grew for the fourth successive month, at 4.2%.
Cement contracts 9.7%
Cement manufacturing which had grown solely as soon as this monetary yr, at 3.2% in October, recorded a pointy 9.7% decline in the month of December.
Overall, core sectors have contracted by 10.1% in the April to December interval, with fertilisers the one sector to report constructive development over the yr, of a modest 3%.
Cement output over this era fell by 18.3%, adopted by metal manufacturing which has declined 16.7%.
Economists stated the core sector numbers ‘temper the exuberance’ generated by upticks in a number of different main financial indicators in December.
“Both steel and cement recorded a deterioration in the pace of year-on-year contraction in December 2020 relative to the previous month, which suggests that caution is warranted in the assessment of the strength of the incipient economic recovery,” stated Aditi Nayar, principal economist at ICRA Limited.
“We continue to expect intermittent setbacks at a sectoral level, as the economy attempts to regain pre-Covid normalcy in a sustained manner,” she added.
“Based on the plateau in the core sector data, juxtaposed with the uptick in auto production trends and recovery in non-oil merchandise exports, we expect the Index of Industrial Production (IIP) to rebound to a modest growth of 0.5-1.5% in December 2020, trailing the level seen in October 2020,” she stated.