On October 29, 2020, the Office of Economic Adviser under the Department for Promotion of Industry and Internal Trade released the Index of Eight Core Industries (ICI) for September 2020. The Index shows monthly growth rates of eight core industries of the Indian economy and maps the volume of production in these industries. On comparing to September 2019, it became evident that the index contracted by 0.8 per cent in September 2020, whereas the contraction in terms of cumulative growth between April 2020 to September 2020 (first half of the current financial year) was –14.9 per cent.
Index of Core Industries (ICI) Index of core industries is an index of eight most fundamental industrial sectors—coal, natural gas, crude oil, refinery products like petrol and diesel, fertilisers, steel, cement, and electricity. Since these industries are the essential or ‘basic’ and/or ‘intermediate’ ingredient for the economy to function and for mapping its health, the sectors provide a fundamental understanding of the state of the economy. Thus, if these eight industries are not growing fast enough, the rest of the economy is unlikely to grow as well.
The index gives different weights and growth rates to each of these sectors to arrive at a final figure. As per the index, refinery products have the largest weight (28.0376) while fertilisers have the lowest weight (2.6276). Besides, electricity has 19.8530; steel, 17.9166; coal, 10.3335; crude oil, 8.9833; natural gas, 6.8768; and cement, 5.3720.
Current Data As per data, the April to September 2020 growth is -14.9 per cent over the same period of 2019. Some of the weightiest sectors have contracted the most. This year’s contraction is based on rather meagre growth last year (1.3 per cent), which points to a sustained period of industrial growth in the Indian economy. The trend of ICI growth over the past 6 months—starting from the Covid-19 pandemic and associated lockdowns shows while the ICI contracted in September but the rate of contraction was less than 1 per cent, far less than the rate of contraction in any of the past 6 months. The September 2020 data shows promise of an economy that may be battling to free itself of the Covid-19 crisis.
Against this background, experts argue that it is best to wait for data of a few more months as a conclusive proof that the economy is on the bend. If there is a surge in the winter months like in most European countries and the US, India’s recovery will be dented yet again.
Courtesy: India Express