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6.5% dip in core sector growth in March

Data released by the industry department on Thursday showed that India’s eight infrastructure sectors contracted by a record 6.5% in March after touching an 11-month high in February. The data shows that India’s core sector grew just 0.6% in FY20 lagging a 4.4% rise in FY19.

All sectors, except coal which grew 4%, saw a drop: crude oil (-5.5%), natural gas (-15.2%), refinery products (-0.5%), fertilizers (-11.9%), steel (-13%), cement (-24.7%) and electricity (-7.2%). These eight infrastructure industries comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).

Aditi Nayar, principal economist at Icra Ltd commented, “With the lockdown in place throughout April, which is expected to have severely curtailed production in many core sectors, the contraction in core sector output is likely to worsen to alarming levels in that month. For instance, the lockdown has curtailed the demand for electricity by a considerable ~24% till April 27.” 

Most of the forecasters have sharply reduced growth projections for India both for FY20 and FY21. For example, Swiss bank UBS  cut GDP growth projection for the year ended 31 March to 4.1% from 4.5% earlier. Similarly, rating agency Crisil Ltd said the lockdown could lead to permanent loss of real GDP of around 4% in FY21.