THE GIST of Editorial for UPSC Exams : 03 August 2020 (Contraction slows: On signs of economic recovery (The Hindu))

Contraction slows: On signs of economic recovery (The Hindu)

Mains Paper 3:Economy 
Prelims level: Index of Industrial Production
Mains level: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment


  • The latest data on output at the eight core industries point to tentative signs that the pandemic caused economic contraction may have begun to bottom out. 
  • The sector-wise performance also affirms that the gradual reopening since June appears to have helped tease backsome smatteringof demand in the economy. 
  • Data:
  • Of the seven industries that extended their contractions, only coal shrank at a faster pace (-15.5%) than in May, when production had declined 14%. 
  • Refinery products, the largest weight on the index contributing 28%, shrank 8.9% marking an improvement from the 21.3% contraction seen the previous month. 
  • The lifting of restrictions on inter and intra-State movement of persons and goods revived both vehicular movement and, consequently, demand for auto fuels. 
  • With personal modes of mobility preferred given the fear of infection, petroproduct consumption grew 11% month-on-month in June. 
  • Electricity output too fell at a slower 11% pace than the precedingmonth’s 14.8% slump, again signalling an uptick in demand from some manufacturing clusters including in western and northern India.

Increasing fiscal deficit:

  • Among the other sectors, steel production continued to tumble— output shrank by more than a third (-33.8%) from June 2019.
  • Cement appeared to have put the worst behind as urban construction and projects under the rural job guarantee scheme spurreddemand. 
  • Cement output fell 6.9%, a sharp deceleration in the pace of decline from May’s 21.4% contraction. 
  • Fertilizers, the only industry to post growth for a second straight month, however, saw the expansion ease to 4.2%, from 7.5% in May. 
  • Still, with monsoon activity above normal so far this year, kharif sowing was almost 14% higher as on July 31 than at the same time in 2019. 
  • With the IMD forecasting above average rainfall in August and September as well, the outlook for the agriculture-reliant rural economy is far more promising than for most other sectors. 
  • To be sure, the economy is still a fair distance from a sustained turnaround with other data flagging the risks to a recovery. 
  • For one, the significant shortfalls in GST collection point to the difficulties the central and State governments are facing in garnering crucially needed revenue. 
  • This has already swelledthe fiscal deficit at the end of the first quarter to 83% of the full year’s target. 


  • With the new infections curve showing no signs of plateauingas yet, policymakers have the tough task of cutting the COVID-19 surge without dampeningeconomic momentum.
  • As lockdown restrictions ease, the economy sees the first signs of recovery.

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Prelims Questions:

Q.1)With reference to the International Tigers day, consider the following statements:
1. International Tigers day was observed on July 29, 2020.
2. St. Petersburg declaration on tiger conservation resolved to double tiger numbers across their global range by 2022.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: C

Mains Questions:
Q.1) What is core sector industries? Highlights the impacts of lockdown on the Core sector andalso measures opted by the government.