Strong show. Core sector growth zooms to 6.2% in April

Aided by a strong show from electricity generation, coal and natural gas sectors, the output of eight core industries hit a three-month high of 6.2 per cent in April 2024, higher than the upward revised output growth of 6 per cent in March 2024. 

The latest reading was substantially higher than the April 2023 overall core industries growth of 4.6 per cent, official data released by Commerce and Industry Ministry on Friday showed. 

Given the latest revision in January 2024 and March 2024 readings, the overall core industries growth for 2023-24 now stands revised upwards to 7.6 per cent (as against 7.5 per cent estimated earlier) as compared to growth of 7.8 per cent in previous fiscal. 

For the month under review, other than fertilizers (-0.8 per cent), all the seven core industries recorded positive growth. 

However crucial sectors like cement and steel output growth was impacted by huge base effect and also lower focus on government capex spending due to the seven phase general elections that began on April 19. 

While cement sector saw a tepid growth of 0.6 per cent (12.4 per cent), the steel output in April 2024 grew 7.1 per cent (16.6 per cent).

The eight core industries —coal, natural gas, crude oil, refinery products, fertilizers, cement, steel and electricity —comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

The government has also now revised upwards the eight core industries output growth for January 2024 to 4.1 per cent. Last month the reading for December 2023 was revised upward to 5 per cent. Previously, the government had revised upwards the November 2023 core industries growth to 7.9 per cent. The monthly readings for September 2023 and October 2023 were also revised upwards in earlier months.

In April 2024, coal sector output grew 7.5 per cent (9.1 per cent in April 2023); crude oil at 1.6 per cent (-3.5 per cent); natural gas at 8.6 per cent (-2.9 per cent); refinery products at 3.9 per cent (-1.5 per cent); fertilizers at -0.8 per cent (23.5 per cent); cement at 0.6 per cent (12.4 per cent); steel at 7.1 per cent (16.6 per cent) and electricity at 9.4 per cent (-4.6 per cent).

EXPERTS’ TAKE 

Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd, said that the core sector expansion recorded a mild uptick to 6.2 per cent in April 2024, with the improved sequential performance of five of the eight constituents offset by a sharp slide in the cement growth to a marginal 0.6 per cent from as high as 10.6 per cent in the previous month, as well as more modest dips in the performance of coal and crude oil. 

“The decline in the cement output growth in April 2024 partly reflects a high base, and could also be dampened by some slowdown in government capex during the Parliamentary elections. 

The steel sector however displayed a healthy 9.4 per cent rise in April 2024, which may be driven by consumer durables”, she said.

Madan Sabnavis, Chief Economist, Bank of Baroda said that the 6.2 per cent growth in April 2024 has been driven quite decisively by base effects for several components of the index. “April has been the time when there has been less focus on spending by the government given the ongoing Elections. Hence the numbers must be read with caution”, Sabnavis said.

“We can expect IIP growth of around 6-6.5 per cent in April”.

On electricity production hitting a robust 9.4 per cent, Sabnavis highlighted that it came over a negative growth of 1.1 per cent last year. “Higher demand due to the heatwave as well as steady business activity contributed to this growth”, he said.