At 8.2%, core sectors’ growth hits 5-month high in June

A view of a steel plant. India’s core sectors’ output surged at a five-month high pace of 8.2% in June, as per data from the Commerce and Industry Ministry, led by a 21.9% spike in steel output 
| Photo Credit: The Hindu

India’s core sectors’ output surged 8.2% in June, the fastest pace in five months, buoyed by a 21.9% spike in steel output and nearly double-digit rise in coal and cement production, as per data released by the Commerce and Industry Ministry on Monday.

Seven of the eight core sectors, which constitute 40.3% of the Index of Industrial Production (IIP), registered an uptick in June, compared to just six in May, when their total output had increased 5%.

Also Read | Key infra sector growth slows down to 4.3% in May

Economists expect the IIP growth, which had hit a three-month high rate of 5.2% in May, to clock a 4%-6% rise in June as well. Coming on the back of a 13.1% rise in output last June, the 8.2% growth in June was noteworthy, they said.

Crude oil was the only sector in the red, marking the 13th successive month of contraction in output, although the extent of decline eased to 0.6%, the lowest amid this streak. Refinery products grew at the fastest pace in nine months at 4.6%, while electricity (up 3.3%) and natural gas (up 3.6%) output growth touched their highest levels in four and five months, respectively.

Also Read | Production rises 5.2%, led by infrastructure and construction goods

Coal production rose 9.8%, the fastest since March, while Cement production rose 9.4%, the slowest in three months. Fertilizers production rose by 3.4%, the lowest pace in at least a year.

On a month-on-month basis, steel output was 1.15% higher in June, while cement production rose 1.7%. However, four sectors clocked a sequential decline from May levels — fertilizers (-5.35%), refinery products (-3.5%), coal (-3.1%) and crude oil (-3%).

‘Broad-based growth’

Core sectors’ overall growth was broad-based and reflected the upturn in infrastructure spends, noted Bank of Baroda chief economist Madan Sabnavis.

“The government push in infrastructure, especially in roads, is reflected by the strong numbers for steel and cement. The cumulative growth in these two sectors has been in double-digits in the first quarter of this year, even though last year had seen a strong performance too, creating a high base,” Mr. Sabnavis said.

ICRA chief economist Aditi Nayar said the tardy onset of the monsoon contributed to an improved performance for sectors like electricity and coal.

“With the boost seen in mining and electricity from a dryer-than-normal June, we expect the IIP growth to print at 4%-6% in June, in spite of the moderation in the year-on-year performance of several available high frequency indicators for the month,” she averred.