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Dip in growth of core sectors

  • Category
    Economy
  • Published
    8th Oct, 2019

The growth of eight infrastructure sectors contracted 0.5 per cent in August, 2019 following broad-based deterioration in output.

Context

The growth of eight infrastructure sectors contracted 0.5 per cent in August, 2019 following broad-based deterioration in output.

About

  • The index of eight core infrastructure industries declined 0.5% during August against the growth in July, according to government data.
  • Production in five sectors, including electricity and cement, shrank. 
  • Output of coal (-8.6%), crude oil (-5.4%), natural gas (-3.9%), cement (-4.9%) and electricity (-2.9%) contracted in August, indicating a broad-based slowdown, while production of refinery products (2.6%), fertilizers (2.9%) and steel(5%) increased.
  • Core Industry sector
    • Core industry can be defined as the main industry of the economy. In most countries, there is particular industry that seems to be backbone of all other industries and it qualifies to be the core industry. In India, there are eight core sectors comprising of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.
    • The electricity has the maximum weight of 10.32% followed by Steel (6.68%), Petroleum Refinery (5.94%), Crude Oil production (5.22 %), Coal production (4.38 %), Cement (2.41%), Natural Gas production (1.71 %) and Fertilizer production (1.25%). These eight Core Industries comprise nearly 40% of weight of items included in Index of Industrial Production (IIP), which measures factory output.
  • Index of Industrial Production
    • It is a monthly production index, which is also considered as lead indicator of the monthly industrial performance. It contains production and growth figures of eight core sectors.
    • It is compiled by Central Statistic Organisation (CSO) under Union Ministry of Commerce and Industry based on monthly production information received from source agencies.

Conclusion

  • Given that private final consumption expenditure growth declined to its slowest in 18 quarters, there are expectations that the RBI could go beyond the 25 basis point cut to support growth. 
  • Festival demand may push industrial growth.
  • The government’s decision to cut the corporate tax rate is expected to boost investment and consumption.
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