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Core sector rebounds from falling spree, breaks four month long jinx

The growth of eight core sectors recovered after remaining in negative in the last four months on account of expansion in production of coal, fertiliser and refinery products.

The growth of eight core sectors recovered after remaining in negative in the last four months on account of expansion in production of coal, fertiliser and refinery products. The growth recovered to 1.3 per cent in December 2019, the government data released on Friday showed. In November, the core sector posted a contraction of 1.5 per cent while in October the same stood at 5.8 per cent. The coal production increased by 6.1% in December 2019, as compared to December 2018. While crude oil production contracted by 7.4 per cent.

Natural gas production declined by 9.2% in the same period. The petroleum refinery production saw an upward trend of 3% year on year. The steel production increased by 1.9%. The cement production increased by 5.5% in December 2019, hinting at signs of revival in the economy. The fertilizer production increased by 10.2 percent in December 2019 over December 2018. On the negative side, electricity generation declined by 1.6% in the last month of 2019. The April-December core sector output growth at 0.2 per cent vs 4.8 per cent Year on Year.

“Despite the pickup in the core sector performance, we expect the IIP growth to dip in December 2019 from the initial 1.8% in November 2019, led by the wider contraction in auto output as well as the YoY decline in non oil merchandise exports after a gap of two months”, Aditi Nayar, Principal Economist, ICRA, said.

The core sector data comes just ahead of Finance Minister Nirmala Sitharaman’s budget and the positive numbers hint that the economy might have just come out of the downward spiral and heading towards revival. The eight core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production. The combined index of eight core industries stood at 133.2 in December 2019. The cumulative growth of the core sector during the April to December 2019-20 period was recorded at 0.2 per cent.

Meanwhile, Nirmala Sitharaman is due to present her second union budget tomorrow as the country looks-on with high expectations. Sitharaman is tasked with announcing a slew of measures to curb the falling GDP growth and rising inflation which has stoked the fear of stagflation among experts.

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