The growth in output of eight key infrastructure industries — known as the core sector — slowed down to 5.2 per cent (year-on-year) in March from 7.1 per cent in February, on the back of a sequential deterioration recorded by five of its constituents.
According to the data released by the Ministry of Commerce and Industry on Tuesday, output decelerated in sectors like coal (8.7 per cent), crude oil (2 per cent), natural gas (6.3 per cent), and steel (5.5 per cent) during March. Meanwhile, the output of refinery products (-0.3 per cent) and fertilisers (-1.3 per cent) contracted during the month. On the other hand, output of cement (10.6 per cent) and electricity (8 per cent) accelerated in March.
Overall in FY24, growth in the core sector stood at 7.5 per cent as against 7.8 per cent in FY23. All the eight constituent sectors registered positive growth during the financial year with output of steel (12.3 per cent) leading the chart, followed by coal (11.7 per cent), cement (9.1 per cent), and electricity (7 per cent) in FY24.
The eight core industries account for 40.27 per cent of the weighting of items included in the Index of Industrial Production (IIP) and, thus, they have a significant impact on the index.
Madan Sabnavis, chief economist at Bank of Baroda, says that coal and cement are the ‘star’ performers driven by growth in general industrial activity as well as an infrastructure push by the government.
“Growth in the case of steel was driven by infrastructure, while fertiliser production witnessed a decline as this is the non-sowing season and beginning of harvest where typically there is little demand. The energy basket of crude, gas, and refinery products showed different tendencies. This can mean growth of around 5-6 per cent in IIP for the month,” he added.
Meanwhile, Aditi Nayar, chief economist at ICRA Ratings, says that electricity generation displayed a healthy expansion in March and has maintained a robust pace in April, with rising heat likely boosting agricultural and household demand.
“Similar to the trend displayed by the core sector, IIP growth is likely to moderate somewhat in March, as the leap year effect fades. We project the IIP growth at 3.5-5 per cent in March 2024,” she added.
First Published: Apr 30 2024 | 7:13 PM IST
