Core industries' output nears year-ago level in September

The index of core industries (ICI) continued its recovery streak in September 2020. It rose from 119.1 in August to 119.7 in September, nearly touching its year-ago level. The year-on-year (y-o-y) contraction in the ICI has been reducing for the last five months, from 37.9 per cent in April to 21.4 per cent in May and 12.4 per cent in June.

For the first time during the current fiscal, coal output recorded double digit y-o-y growth of 21.2 per cent in September. The growth, however, is not as impressive as it appears, as it has come after a 20.5 per cent contraction in coal output in September 2019 caused by floods in Bihar.

Crude oil and natural gas production contracted y-o-y by 6.1 per cent and 10.6 per cent, respectively, in September 2020. These industries have been suffering from supply-side inefficiencies for many years. September 2020 was no exception to this.

The fertiliser industry had a good run this year, clocking volumes of 21.6 million tonnes during April-September 2020, the highest since 2011. This was owing to timely arrival of monsoon and a promising Kharif season. But, in September 2020, the output fell y-o-y by 0.3 per cent.

Steel production returned to grow in September 2020, albeit at a marginal 0.9 per cent, after suffering y-o-y contraction for six months in a row. Domestic demand for steel picked up owing to a surge in production of automobiles and consumer durables to meet the pent-up demand and also fresh festive demand.

Cement production fell by 3.5 per cent in September 2020, as compared to the same month a year-ago. The fall, however, was the lowest recorded in the last seven months. The improvement can be attributed to higher demand from rural and semi-urban areas, a pick-up in residential property sales coupled with return of labourers to large cities and a 60 per cent y-o-y jump in projects awarded by the National Highway Authority of India (NHAI) during April-September 2020 to build 1,330 km of highways.

With ample supply of coal stock, electricity generation recorded a y-o-y growth of 3.7 per cent in September 2020. The growth came on top of a 2.6 per cent fall registered in the year-ago period. The fuel source-wise break-up available from the Central Electricity Authority (CEA) shows that the growth was entirely driven by thermal power generation.

Shivani Sharma, Mohsin Shaikh