India's core sector output rises to six-month high of 8.4% in April

The output of eight core infrastructure industries increased to a six-month high of 8.4 per cent year-on-year (YoY) in April, led by a sharp jump in coal output, data released by the Department for Promotion of Industry and Internal Trade (DPIIT) showed.

The growth in these eight sectors was 62.6 per cent in April last year due to a low base effect caused by pandemic-induced lockdowns.

The eight sectors — coal, steel, cement, fertilisers, electricity, natural gas, refinery products, and crude oil — comprise two-fifths of India’s total industrial production. Out of the eight sectors, barring crude oil and steel, all registered positive YoY growth in April.

Production of coal, natural gas, refinery, fertiliser, electricity, and cement witnessed an increase of 28.8 per cent, 6.4 per cent, 9.2 per cent, 8.7 per cent, 8 per cent and 10.7 per cent, respectively as compared to last year. Steel output contracted 0.7 per cent.

Sunil Kumar Sinha, principal economist at India Ratings, said the core sector growth was led primarily by a record YoY growth in coal output.
 

“Notably, output growth in electricity and petroleum and refinery products were on a high base and at an eight-month and six-month high, respectively. Production of core segments also just crossed the pre-Covid level, alluding to the weak recovery across infrastructure sectors,” Sinha said.

Despite a low base, crude oil production contracted 0.9 per cent, following the same trend for over four years now. “This means the country’s dependence on global crude oil will be even higher, which is on the boil leading to imported inflation and its associated consequences for the economy,” Sinha said. According to Bank of Baroda Chief Economist Madan Sabnavis, the crude oil production decline is still symptomatic of less investment going into this sector, which is needed under the present conditions.

Growth in fertilisers of as much as 8.7 per cent is on the expected lines as the industry prepares for kharif sowing. Besides, the higher subsidy being announced by the government has given a boost to the producers, Sabnavis said.

On a sequential basis, the Index of Eight Core Industries declined by 9.5 per cent in April amid geopolitical tensions.

Ratings agencies expect growth in the index of industrial production at around mid to high single digits in April.