Indicating an uptick in industrial activity, the index of eight core industries expanded at its fastest pace this fiscal at 4.9 per cent in August led by strong growth in the sectors of coal and electricity.
The core sector grew by 2.6 per cent in July and expanded by 3.1 per cent in August 2016.
Before this, the core sector grew at its fastest pace in March 2017 at 5.2 per cent.
“The cumulative growth of the core sector during April to August 2017 was 3 per cent,” said an official release on Tuesday. This however, is lower than the 5.4 per cent growth in the corresponding period a year ago.
But the August data could indicate an upswing in factor output as well, which has been muted post demonetisation and the goods and services tax.
The eight core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
Leading the upsurge in August, coal mining grew by a whopping 15.3 per cent as against 0.3 per cent growth in July. This was followed by electricity generation that increased by 10.3 per cent compared to 6.5 per cent in July.
However, cement, crude oil and fertiliser production were in the red. While crude oil production contracted by 1.6 per cent in August, cement production dipped by 1.3 per cent and fertilisers fell by 0.7 per cent.
Though the disaggregated data of the core sector paints a less favourable picture, analysts are hopeful of an improvement in factory output with the upcoming festive season.
“The improvement in growth of automobile production and core output, and the rebound in the PMI, portend an uptick in industrial growth in August. Given the favourable base effect and the expected rebuilding of inventories prior to the festive season, we expect the IIP growth to improve,” said Aditi Nayar, Principal Economist, ICRA.
The Finance Ministry and industry have been pushing for another rate cut by the Monetary Policy Committee but with inflation on the rise, analysts have said it is unlikely.