core-sector-at-lowest-in-14-years

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.

Core Sector At Lowest in 14 Years Key Data:

  • 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.

Sector-wise Statistics:

  • 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