The Ministry of Commerce and Industry has recently released data indicating a contraction of 23.4% in May 2020 within the eight core sector industries. This follows a 37% contraction seen in April 2020. The same industries experienced a growth of 3.8% in May 2019. This article will delve into the key points, reasons behind this contraction, its potential impact, details on core sector industries, and the significance of the Index of Industrial Production (IIP).
Key Points in Core Sector Data
According to data from the Ministry of Commerce and Industry, all seven core sectors—excluding fertilisers—experienced negative growth in May. These sectors include coal, crude oil, natural gas, refinery products, steel, cement, and electricity. In contrast, fertiliser production indicated a growth of 7.5% after two consecutive months of contraction. Steel and cement, however, exhibited a shrinkage of 48.4% and 22.2% respectively.
Behind the Contraction
The primary reason behind the contraction of these sectors lies in the impact of the national lockdown. Many factories faced operational issues due to the shortage of labour and cash.
The Expected Impact
Industry experts suggest that the lockdown’s aftershocks will continue to affect the domestic industry in the upcoming months. They predict future contractions, albeit at a lower rate.
Understanding Core Sector Industries
The eight core sector industries encompass coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and electricity. These industries collectively represent 40.27% of the weight of items included in the IIP. The industries, listed in the descending order of their weightage, are Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilisers.
Industry Weightage (In Percentage)
Petroleum & Refinery production hold the highest weightage of 28.04%, followed by Electricity generation at 19.85%, Steel production at 17.92%, Coal production at 10.33%, Crude Oil production at 8.98%, Natural Gas production at 6.88%, Cement production at 5.37% and Fertilizers production at 2.63%.
About the Index of Industrial Production
The IIP is an indicator that tracks changes in the volume of industrial product production over a specified period. Compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, it is a composite indicator that measures the rate of industry groups classified under broad sectors—Mining, Manufacturing, and Electricity—and use-based sectors—Basic Goods, Capital Goods, and Intermediate Goods. 2011-2012 serves as the base year for the IIP.
The Significance of IIP
Used by government agencies such as the Ministry of Finance and the Reserve Bank of India for policymaking purposes, the IIP remains crucial for calculating quarterly and advance GDP estimates.
Last Modified: February 7, 2024