Key takeaways from core sector numbers for March 2020
The core sector growth captures the output growth in 8 of the key infrastructure sectors that constitute the backbone of the economy. Here is how the core sector components panned out for March 2020.
•Coal Production (weightage: 10.33%) witnessed 4% growth in the month of March as coal production managed a revival after facing challenges through the year.
•Crude Oil (weightage: 8.98%) saw an output decline of 5.5% for March, which is hardly surprising considering the non-remunerative prices prevalent for crude oil.
•Natural Gas (weightage: 6.88%) saw a sharp decline of 15.22% in March as the sharply lower prices fixed for gas by the government left little incentive for gas extractors.
•Refinery Products (weightage: 28.04%) fell marginally by 0.5% as the COVID-19 impact only hit in the last week of March. This avoided a precipitous fall in core sector.
•Fertilizers (weightage: 2.63%) also saw an 11.9% fall in production during the March 2020. The weak agri demand and low rural incomes had an impact on fertilizer output.
•Steel (weightage: 17.90%) saw a decline of 13% in March as steel companies had shut down production from February itself due to tepid demand and Chinese competition.
•Cement (weightage: 5.37%) saw one of the sharpest cuts of 24.7% as construction demand virtually dried out and most cement factories were forced to shut down.
•Electricity generation (weightage: 19.85%) also had a fall of 7.2% in the month of March, largely due to power generation units remaining shut due to weak factory demand.
Fiscal 2020 sees lowest core sector growth in 7 years
The annual core sector growth has been captured in the chart below.
Clearly, the pressure of COVID-19 is showing as 7 out of the 8 core sector groups have shown negative growth in March 2020. A clearer picture of the core sector growth should emerge once the immediate impact of COVID-19 is over.