Crude, cement, power pull down core sector growth to 5-month low

The annual growth rate of 8 core sector industries during the April-2022 to March 2023 period was 7.6%, a decline of nearly 3 per cent. The core sector output has grown at a CAGR of 3.6% since FY20 underlying that a sustained recovery is still some distance away, Sunil Sinha, Principal Economist of India Ratings and Research, told ETV Bharat.

New Delhi : A decline in the production of crude oil, electricity and cement in the country pulled down the growth rate of 8 core infrastructure sector industries to a five-month low in March this year, showed the latest official data released on Friday.

As per the data released by the Ministry of Commerce and Industries, the combined Index of 8 Core Industries (ICI) turned out to be 3.6 per cent in March this year on a year-on-year basis. In February this year, the growth rate of 8 core industries was 7.2 per cent on a year-on-year basis.

The annual growth rate of these 8 core sector industries during the April-2022 to March 2023 period turned out to be at 7.6%, a decline of nearly 3 per cent in comparison to the growth witnessed during the previous financial year. These 8 core infrastructure sectors, coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity generation have a weight of more than 40 per cent in the Index of Industrial Production (IIP).

According to Sunil Sinha, Principal Economist of India Ratings and Research, the low annual growth rate in five of the 8 core sectors, except coal, fertilizers, and steel, pulled the year-on-year growth in the index of infrastructure industries down to a five-month low in March 2023.

The infrastructure sectors that performed poorly in the month of March are natural gas, which registered a meagre growth rate of 2.8 per cent which is a three-month low, refinery products which registered a low growth rate of just 1.5% on year on year basis, which is also a four-month low, and cement which registered a decline of 0.8 per cent on a year-on-year basis in the month.

In addition, electricity generation, which has nearly one-fifth weight in core sectors, registered a decline of 1.8 per cent in March on a year-on-year basis. “Cement and electricity witnessed a contraction in output after a gap of four and 30 months respectively due to unseasonal rains in March 2023,” Sunil Sinha told ETV Bharat.

According to the data analysed by the India Ratings and Research, the output of crude oil declined by 2.8% in March this year on an annualised basis which is the tenth consecutive month of the decline of production of crude oil in the country.

Coal, fertilizers and steel sectors shine

Though the decline in the production of crude oil, electricity and cement pulled down the growth rate of infrastructure industries to half in March this year in comparison with the core sector’s growth a month earlier, however, there are three other infrastructure sectors – coal, fertilizers and steel that performed well during the month.

While coal production in the country registered a healthy growth of double digits in March as its production expanded by more than 12 per cent in March on a year-on-year basis, the production of fertilizers and steel also registered a healthy growth of 9.7 per cent and 8.8 per cent respectively.

According to Sinha, the growth rate of steel production in the country has been sustained due to a sustained capital expenditure push by the Union Government and states which has been further supported by a pickup in the Chinese economic activity as the world’s second-largest economy is witnessing a strong demand as it emerges out of the Covid-19 global pandemic.

“The core sector output has grown at a CAGR of 3.6% since FY20 underlying that a sustained recovery is still some distance away. With the weakening global and domestic demand, India Ratings believes that the growth in infrastructure industries would be under pressure in the ongoing fiscal year. As a result, the agency expects the core sector annual growth in FY24 at around 5%,” Sunil Sinha said.