Core sector grows 8%, raises hope
Nov 01 2013 , New Delhi
Construction activity revives, as power, steel, cement surge
These industries had grown by 3.7 per cent in August; the growth was only 3.2 per cent in the first half (April-September), according to monthly core sector data released by the government on Thursday.
The September growth was driven by higher production of coal (12.5 per cent), electricity (12.6 per cent) and cement (11.5 per cent).
Coal has done well in the past two months, helping both power and steel production, especially after coal linkage issues of the power sector were resolved.
Steel output growth of 6.6 per cent along with good growth in cement indicate that the construction industry, a big employer with a pan-India presence, is on the road to recovery.
Coal, crude oil, oil refinery, natural gas, steel, cement, electricity and fertiliser comprise the core sector. The industries account for 37.9 per cent of India’s overall industrial production, which grew by just 1 per cent last year. This pulled down economic growth to 5 per cent in 2012-13.
Icra senior economist Aditi Nayar said the encouraging pickup in core sector growth along with the double-digit increase in merchandise exports suggested that the index of industrial production (IIP) might have posted a modest improvement in September than in the preceding first five months of the year.
IIP numbers are released in the second week of the month.
“Nevertheless, it would be premature to conclude that a turnaround is under way based on the 8 per cent core sector growth, until there is evidence of a sustained improvement in manufacturing growth,” she said.
The September pickup in growth in some of the core sector industries reflected supply-side improvements, such as better thermal electricity generation due to improved supplies of coal, she said.
Cement production showed erratic trends earlier but the sharp growth in September may reflect a build-up of inventory in anticipation of rural demand that will arise after the kharif harvest.
Deloitte chief economist Anis Chakravarty said there had been a lot of fluctuations in IIP numbers. Without seeing the IIP numbers, it would be difficult to say if there were signs of industrial recovery, he added.
In August the core sector had grown by 3.7 per cent, but overall industrial production growth had fallen to 0.6 per cent, indicating that manufacturing output was weak. “The good growth in electricity, coal and cement were, however positive signs,” he said.
Last year, core sector output grew by 3.2 per cent, slower than the 5 per cent growth in the year before.
Petroleum refinery products growth slowed to 8 per cent in September. Fertiliser production growth too slowed to 5.3 per cent. There was a small drop in crude imports in September and that could be one of the reasons. Domestic crude production increased marginally by 0.6 per cent in September, but natural gas production declined by 14.1 per cent.