The production rate of India's eight major industries remained abysmally low in June 2020, official data showed on Friday. However, the rate of fall in the Index of Eight Core Industries (ECI) decelerated on a sequential basis, on account of opening up of economic activities.
On a sequential basis, the Index of Eight Core Industries for June declined by 15% (provisional) compared to decline of 22% (revised) during the previous month (May).
Though not comparable, the ECI index had shown a growth of 1.2% in June 2019.
In a statement, the Office of Economic Adviser, Department for Promotion of Industry and Internal Trade, said: "Cumulative growth during April to June 2020-21 was (-)24.6 per cent."
"Final growth rate of Index of Eight Core Industries for March 2020 is revised at (-) 8.6 per cent."
The ECI comprise coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity. It comprises over 40% of the weight of items included in the Index of Industrial Production (IIP).
On sector-specific basis, the output of refinery products, which has the highest weightage of 28.03, declined (-) 8.9% in June 2020 compared to the corresponding month of the last fiscal.
Similarly, electricity generation, which has the second highest weightage of 19.85, inched lower by (-) 11%.
Steel production, the third most important component with weightage of 17.92 , was lower by (-) 33.8% during the month under review, while coal mining, with a 10.33 weightage, edged-lower by (-) 15.5%.
The extraction of crude oil, which has an 8.98 weightage, declined by (-) 6% during the month under consideration.
The sub-index for natural gas output, with a weightage of 6.88, declined by ( -) 12%.
Cement production, which has a weightage of 5.37, slid by (-) 6.9% in the month under review.
However, fertiliser manufacturing, which has the least weightage -- only 2.6 3 -- rose by 4.2% last month.
"The pace of the de-growth in the core sectors narrowed moderately to 15 per cent in June 2020, in line with our estimate, from 22 per cent in May 2020, led by an improvement in all the constituents except coal and fertilisers," said Aditi Nayar, Principal Economist, ICRA.
"The trend of an uneven recovery being displayed by various sectors continued in June 2020, with cement, refinery products and steel recording a sharp improvement, even as electricity, natural gas and crude oil displayed a muted pickup."
According to Suman Chowdhury, Chief Analytical Officer at Acuite Ratings and Research: "We expect the contraction in core industrial sector to come down as the months progress and the economy catches steam. However, entering into positive territory might be sometime-off, at least 6 months."
"Clearly in the context of these data, growth rather than inflation is likely to continue as the focus of MPC who may go for a modest rate cut to improve the market sentiments."
"However, the key takeaway in this policy cycle will be the guidance on moratorium and loan restructuring as credit risks increase in the financial sector."