The output of core India’s Core Sector contracted to the lowest in at least 14 years, pointing to a deepening industrial slowdown. Basics of the News:
- As per the data released by the commerce and industry ministry, the core sector output falls to 5.2% from a growth of 4.3% in the year-ago period.
- The performance of the eight core sectors remained dismal, with a growth of 1.3% as against 5.5% during the corresponding period a year ago.
- The recent slowdown in the core sector has not been observed so far in either the 2011-12 base or the 2004-05 base series.
Reasons: Experts say that the continuum monetary stimulus by the central bank has worsened the situation.
- In order to keep inflation within the bracket of the central bank’s target range in the near term, the central bank simultaneously has been reviewing the monetary policy through rate cut.
- Experts agreed that seven out of the eight core industries showing a contraction was a worrying signal, but said the trend could be reversed in a few months.
- Barring fertilizers, where the output improved by 5.4% in September, the other seven infrastructure industries witnessed a contraction.
- Coal was the worst performer on account of an extended monsoon, a surge in renewable energy supply and labor issues at state-run Coal India Ltd.
- Output contracted by 20.5% in September, compared to an 8.6?cline in the previous month and a 6.4% expansion in the year-ago period.
- Coal also accounts for a substantial share of the freight moved by the Indian Railways and the country’s power generation capacity. Of India’s installed capacity of 360 gigawatts, 54% is coal-fuelled.
- Crude oil: Crude oil production contracted 5.4% in September in continuation of the trend for the last year,
- Natural gas: Natural gas output contracted for the sixth month on the trot in September to 4.9%.
- Electricity output: Electricity output contracted 3.7% in September, its second straight month of contraction.
- Cement production: Cement production contracted 2.1% in September, indicating the continued weakness in construction activities.
- Refinery products: Refinery products contracted 6.7% in September after a 2.6% growth in the previous month.
- Fertilizer output: Fertilizer output showed steady growth for the fourth month to 5.4% in September.
- Steel output: Steel output marginally shrank by 0.3% in September from a growth of 5.1% in the previous month.
Initiative Taken: The government has taken a series of steps to reverse the trend, including a cut in the corporate tax rate in September. Also read: Redefining MSME Sector In India MSME Sector in India