Core sector output up 5%, signals industrial recovery

Core sector output rose by 5 per cent in March, recovering from the one-year low growth rate of 1 per cent in February.

The rebound was led primarily by robust growth in steel and coal output, supported by a stable rise in natural gas production.

The data released by the Commerce and Industry Ministry on Monday showed that the eight core industries — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and electricity — had a cumulative growth rate of 4.5 per cent in FY17. This was higher than the 4 per cent rise in 2015-16.

Contributing 38 per cent to industrial production (index of industrial production), core sector output had dipped in February mainly due to a decline in production in a majority of sectors such as crude oil, natural gas, refinery products, fertilisers, and cement.

In March, however, continuing the growth momentum, steel output rose by 11 per cent, up from the 8.7 per cent rise in February. The contraction in cement output slowed to 6.8 per cent from the 15.8 per cent contraction in February.

“Notwithstanding the considerable improvement relative to the previous month, the 6.8 per cent contraction in cement output in March signals that the construction sector is yet to fully recover from the disruption that had set in after the note ban,” said Aditi Nayar, principal economist, ICRA.

On the other hand, with its second-highest growth rate of 10 per cent, coal production has also improved over the 7.1 per cent growth seen in the previous month. This has fired up activity in coal-based electricity plants with power generation also up by 5.9 per cent as compared to the 1.9 per cent growth in February.

The position of both crude oil and refinery products also improved, though slowly. While crude oil turned in a positive growth rate of 0.9 per cent in March after a 3.4 per cent fall in the previous month, the productionof refinery products fell by 0.3 per cent, slowing from the 2.3 per cent rate of fall earlier.

Fertiliser production continued to fall for the fourth consecutive month, contracting by 0.8 per cent in March. A pickup in auto production, core sector output, and merchandise exports in March signals that IIP growth would revive relative to the 1.2 per cent contraction in February, ICRA said.