Core sector output expands by 18.1% in May, highest in 13 months

In May, the output of coal, crude oil, refinery products, fertiliser, cement and electricity rose by 25.1%, 4.6%, 16.7%, 22.8%, 26.3% and 22%, respectively

Led by healthy growth in coal, crude oil, fertilisers, cement and electricity production, output of eight core industries grew to a 13-month high of 18.1 per cent in May this year, according to official data released on Thursday.

The growth of core infrastructure sectors expanded by 16.4 per cent in the year-ago period and 9.3 per cent in April this year.

The last high growth was recorded in April 2021 when it was 62.6 per cent.

In May, the output of coal, crude oil, refinery products, fertiliser, cement and electricity rose by 25.1 per cent, 4.6 per cent, 16.7 per cent, 22.8 per cent, 26.3 per cent and 22 per cent, respectively.

Growth rate in the production of natural gas and steel slowed down by 7 per cent and 15 per cent in the month under review as compared to 20.1 per cent and 55.2 per cent, respectively in May 2021.

Cumulatively, during April-May 2022-23, the output of these eight sectors declined to 13. 6 per cent as compared to 36.3 per cent during the same period of FY22.

Icra chief economist Aditi Nayar said that the core sector growth for May printed at a robust, but "optically misleading" 18 per cent, boosted by the low base of the second wave of Covid-19.

The disaggregated data showed a broad-based improvement in the year-on-year growth, benefitting from the low base, with the exception of coal, which nevertheless continued to record a high growth, she said.

"Compared to the pre-Covid level, the core index reported a growth of 8.1 per cent in May 2022, led by all constituents except crude oil. Fertiliser, coal, cement and electricity output displayed a double-digit expansion in May 2022 over the May 2019 levels," Nayar added.

"We expect the IIP (Index of Industrial Production) or factory output to expand by 16-19 per cent in May 2022, benefitting from the high growth in the core sector as well as various other high frequency indicators," she said.

The eight core industries account for 40.27 per cent of the IIP.