November 2020: Core Sector Contracts

The eight key core sectors contracted for the ninth consecutive month in November, posing some concerns for policy makers in the new year. The key infrastructure sectors contracted 2.6% in November, sharper than the 0.9% decline in the previous month. The core sectors had witnessed 0.7% growth in the same month last year.

The crucial sector accounts for nearly 41% of the index of industrial production and the November numbers may impact the factory output, which will be released later. Between April and November, the core sector contracted 11.4%.

Separate data showed the Centre’s fiscal deficit touched 135.1% of the 2020-21 Budget estimates. The deficit at the end of November 2019 was at114% of the Budget target for 2019-20. Sluggish revenues and higher spending commitment has widened the deficit and most economists expect it to be way above the Budget target of 3.5% of GDP set for the current fiscal year.

With four months still left in the fiscal year, the government’s fiscal deficit had already climbed to Rs 10.8 lakh crore in April-November 2020, 33% higher than the year-ago level, and 35% higher than the full year Budget estimate.

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