Core infrastructure output contracts 1.3 per cent in December, says data

NEW DELHI:  India’s core infrastructure sector contracted by 1.3% in December 2020, continuing its momentum of slide since lockdown, which they fear can drag down India’s recovery.

The only time the sector saw some revival was in September, mainly on account of festival boost, when it grew by 0.6% as the revised data suggested, released by the Commerce and Industry Ministry on Friday.

However, the festive revival was not sustained and as warned by the economists, the core industry saw a 2.5 per cent contraction in October, followed by 2.6% in November.

The numbers remain crucial benchmark for the growth of the economy as the eight core industries constitute 40.27% of the Index of Industrial Production.

“Based on the plateau in the core sector data, juxtaposed with the uptick in auto production trends and recovery in non-oil merchandise exports, we expected the IIP to rebound to a modest growth of 0.5-1.5 per cent in December 2020, trailing the level seen in October 2020,” Aditi Nayar, Principal Economist ICRA said. According to the data released by the commerce ministry, the decline was mainly due to decline in production of natural gas, refinery products, steel and cement.

Barring coal and electricity, almost all sectors recorded negative growth in December 2020.

The output of crude oil, natural gas, refinery products, fertiliser, steel and cement declined by 3.6%, 7.2%, 2.8%, 2.9%, 2.7%, and 9.7 %, respectively.