Eight core industries' output contracts to record 6.5% in March
ICRA expects industrial output to shrink 15-20% in March based on the contraction in the core sector, auto production and non-oil merchandise exports.
With the lockdown in place throughout April 2020, which is expected to have severely curtailed production in many core sectors, the contraction in core sector output is likely to worsen to alarming levels.
New Delhi: The output of eight core infrastructure industries shrank by a record 6.5 per cent in March due to significant dip in production of crude oil, natural gas, fertiliser, steel, cement and electricity amid the coronavirus lockdown.
The eight core sectors had expanded by 5.8 per cent in March 2019. In February this year, the sectors recorded a growth of 7 per cent.
Production of crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity contracted by 5.5 per cent, 15.2 per cent, 0.5 per cent, 11.9 per cent, 13 per cent, 24.7 per cent and 7.2 per cent, respectively, in the month under review, according to data of the commerce and industry ministry released on Thursday.
The growth rate of coal production declined to 4.1 per cent in March from 9.1 per cent in the same month of 2019.
During April-March 2019-20, core industries recorded 0.6 per cent growth against 4.4 per cent in 2018-19.
The record contraction in the growth rate of eight core sectors will have its impact on Index of Industrial Production (IIP). These sectors account for about 40.27 per cent in the IIP.
Commenting on the numbers, Icra Vice President Aditi Nayar said the core sector contraction in March 2020 represents the worst performance in the current series, even though it is surprisingly not as deep as "we had feared".
The dip in contraction is at the record low as such a decline in a month was neither recorded in 2011-12 base year nor in 2004-05.
"Based on the contraction in the core sector, auto production and non-oil merchandise exports, we expect industrial output to contract by 15-20 per cent in March 2020," she said.
With the lockdown in place throughout April 2020, which is expected to have severely curtailed production in many core sectors, the contraction in core sector output is likely to worsen to alarming levels in that month, she added.
The outbreak of the virus has also impacted the country's exports growth, which dipped by a record low of 34.6 per cent in March.
These contractions may have a bearing on the country's overall economic growth, which was estimated at 5 per cent in 2019-20.
Several multilateral agencies -- including the IMF and World Bank -- as well as rating agencies -- like Moody's, Fitch and S&P -- have significantly slashed India's growth projection for 2020-21 due to coronavirus outbreak.
Barring food and pharma companies, almost all the manufacturing units in the country are closed due to lockdown, imposed since March 25 this year to contain the spread of COVID-19.
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