Output in core eight industry sectors contracted for the seventh month in a row but reopening of the economy reduced the rate of decline to 0.8 per cent in September against 7.3 per cent in the previous month.
Coal, electricity and steel, which constitute over half of the core sector index, showed a rise in production in September. Coal output grew for the second month in a row, with growth rate accelerating to 21.2 per cent against 3.6 per cent in August.
The growth in the sectors is likely to have a positive impact on the index of industrial output (IIP) which declined for the sixth straight month at eight per cent in August as core sector has 40 per cent weight in the former.
Experts believe that IIP may show a moderate growth rate in September after declining for six straight months.
"With the shrinking of the contraction of the core sector output, and the growth displayed by both auto production and non-oil exports, the IIP may well be able to eke out a small growth in September," said ICRA principal economist Aditi Nayar.
However, she sounded a word of caution on over-interpreting the data. "While many lead indicators have displayed signals of a strengthening economic recovery in September 2020, we caution that the sustainability of the upturn may not be universal, and await signs of its durability," she said.
The core sector declined 14.3 per cent in the first six months of the current financial year against 1.3 per cent growth in the entire 2019-20.
Five segments showed a fall in production in September, compared to six in August. However, there are some changes in them in this regard. Fertilser sales, which had been rising since May despite a nationwide lockdown to contain the spread of the coronavirus, fell by 0.3 per cent in September. Electricity generation, which had been contracting since March, rose by 3.7 per cent in September.
Also, steel production showed a small growth of 0.9 per cent in September against 1.7 per cent fall in the previous month.
This together with decline in contraction in cement output to 3.5 per cent in September against 14.5 per cent in the previous month showed that construction activities are picking up pace.
On the other hand, decline in natural gas production accelerated to 10.6 per cent from 9.5 per cent in this period, while crude oil continued to contract at elevated level -- six per cent vs 6.3 per cent.
Refinery production saw fall coming down to 9.5 per cent against 19.1 per cent. Nayar attributed this to improved mobility of people and goods.
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