Aided by a strong show from electricity generation, coal and natural gas sectors, the country’s eight core industries output growth in May 2024 stood at 6.3 per cent, higher than 5.2 per cent growth recorded in same month last year. This is the fourth straight month when core industries output has been at 6 percent or higher.
The latest reading was however lower than the upward revised April 2024 output growth of 6.7 per cent. Prior to the latest revision, April 2024 reading was pegged at 6.2 per cent.
Upward revision in steel output to 8.8 per cent and electricity generation to 10.2 per cent has led to overall growth reading getting marked up in April 2024, data released by Commerce and Industry Ministry showed.
For the April-May 2024 period, the core industries output came in at 6.5 per cent, substantially higher than 4.9 per cent in same period last year, official data released on Friday showed.
Month under review
For the month under review, other than crude oil (-1.1 per cent), fertilizers (-1.7 per cent) and cement (-0.8 per cent), all the five other industries recorded positive growth.
While coal sector grew 10.2 percent (7.2 per cent in May 2023), electricity generation saw a robust 12.8 per cent growth (0.8 per cent in May 2023).
Natural gas output grew 7.5 per cent (-0.3 per cent). Refinery products output grew a modest 0.5 per cent (2.8 per cent). Steel sector output came in at robust 7.6 per cent (12 per cent in May 2023).
The eight core industries — coal, natural gas, crude oil, refinery products, fertilisers, 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 now revised upwards the eight core industries output growth for February 2024 to 7.1 per cent.
Last month the reading for January 2024 was revised upwards to 4.1 per cent. Prior to that, 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.
EXPERTS’ TAKE
Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd, said that the core sector growth eased to 6.3 per cent in May 2024 from 6.7 per cent in the previous month led by all the constituents except electricity and coal.
“A combination of factors including the heatwave over parts of the country and the phased Parliamentary Elections could have curtailed activity and execution in some sectors. At the same time, the heatwave boosted demand for power, which translated into a rise in growth of coal and electricity in May 2024 as compared to the previous month. We expect IIP growth print at 4-5 per cent in May 2024,” she added.
Madan Sabnavis, Chief Economist, Bank of Baroda, said that the base effect did provide a prop to segments which did well.
Power sector growth of 12.8 per cent was mainly due to the heatwave which led to higher demand, he added.
Higher power generation also led to higher growth in mining as coal production increased. Steel growth at 7.6 per cent was propped up by both government spending as well as auto sectors, Sabnavis said.
Cement production fell by -0.8 per cent due to strong double digit base effect of last year. A slowdown in capex in May of government affected some projects involving cement.
Fertilizers production was down by 1.7 per cent which can be attributed more to adequate stocks for sale during kharif season.
Crude oil and refinery products witnessed low and negative growth mainly due to lower demand for diesel, he said.