Impacts of Heatwaves on India’s Core Industrial Sectors

Source: The post impacts of heatwaves on India’s core industrial sectors has been created, based on the article “Mixed signals: India needs to strengthen momentum in the key industrial sectors” published in “The Hindu” on 3rd July 2024

UPSC Syllabus Topic: GS Paper3- Economy

Context: The article discusses how India’s core industrial sectors slowed down in May due to a severe heatwave. Despite this, coal and electricity sectors grew. The article also mentions a rebound in factory activity in June as indicated by the HSBC India Manufacturing PMI.

For detailed information on Core Industries read this article here

How Did the Heatwave Affect India’s Core Industrial Sectors?

1. Power Demand Increase: Due to the heat, there was a higher usage of cooling systems, leading to increased demand for electricity. Power generation expanded by 12.8%.
2. Coal Production Boost: Coal production, necessary for power plants, grew by 10.2% to meet the rising electricity demand.
3. Decrease in Other Sectors: Production in sectors like crude oil, fertilizers, and cement declined due to reduced activity. For example, fertilizer production contracted for the fifth consecutive month, highlighting ongoing challenges in agriculture.
4. Construction Slowdown: The extreme heat led to decreased construction activities, which lowered the demand for cement and steel.

What Challenges Does the Manufacturing Sector Face?

1. Heatwave Impact: The severe heatwave in May significantly lowered factory output to a three-month low, illustrating vulnerability to extreme weather conditions.
2. Rising Costs: Increases in staff expenses, material costs, and transportation led to higher manufacturing costs. This has forced companies to raise their selling prices, the largest increase observed in over two years.
3. Inflationary Pressures: The higher costs are contributing to inflation within the sector, complicating pricing strategies and potentially reducing competitiveness.
4. Decreased Confidence: Future output confidence dipped to a three-month low, indicating worries about ongoing economic conditions despite a rebound in June’s PMI (India Manufacturing Purchasing Managers’ Index), which stood at 58.3, up from 57.5 in May.

Way forward

The upcoming Union Budget is an opportunity for policymakers to implement changes to support key industrial sectors. This could help maintain and strengthen economic momentum despite recent challenges.

Question for practice:

Examine how the severe heatwave affected India’s core industrial sectors and the challenges faced by the manufacturing sector.