Core industries output continues to shrink in June; these two sectors face maximum hit

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Published: July 31, 2020 6:22 PM

India’s core industries shrank by 15 per cent in the month of June 2020 but the fall was less severe than the previous month.

core industries, core output, industries growth, steel, coal, electricity, natural gas, refinery products, fertilizersSteel production fell 33.8 per cent and coal production fell 15.5 per cent on-year in June.

As India steps out of the nationwide lockdown, the wheels of core industries have started to churn, however, it will take some more time to revive to the pre-Covid levels. India’s core industries shrank by 15 per cent in the month of June 2020 but the fall was less severe than the previous month, according to the Department for Promotion of Industry and Internal Trade (DPIIT). In May, the core industries contracted by 22 per cent. Except for fertilzers, all the core sectors faced contraction in June, while the production of steel and coal faced the maximum hit. 

Steel production fell 33.8 per cent and coal production fell 15.5 per cent on-year in June. Among other sectors that contracted in the month, natural gas fell 12 per cent; electricity contracted by 11 per cent, crude oil production by 6 per cent, refinery products by 8.9 per cent; cement fell 6.9 per cent. Fertilizers was the only sector that grew (4.2 per cent) in the month. 

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Amid a major contraction in infrastructure and construction activities, the near-term outlook is not bright too. The coronavirus pandemic is likely to take a toll on steel businesses in India as the steel consumption in the country is expected to fall by at least 10 per cent for rated Indian steel-makers in the 12 months to March 2021. The ongoing demand shock and an inability to pass on elevated costs to customers is likely to severely hit the profitability of Asia Pacific steelmakers over the year to March 2021, said a report by the Moody’s Investors Service.

 

 While the profitability is set to drop 15 per cent in the current fiscal, the sales volumes will contract for the first time since 2015. The sales volume is expected to remain in high single-digits in India, following a negative outlook for the steel sector. 

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