Core sector begins FY14 on a positive note

Rises 4.2% in April; but growth not likely to drive IIP data for the month

Output of the eight core sectors grew 4.2 per cent in April, compared with 2.5 per cent in March. The rise was primarily aided by electricity generation and the fertiliser and cement segments, showed official data released on Monday.

Though the core industries have a weight of 38 per cent in the Index of Industrial Production (IIP), experts say the outlook for industrial growth for April isn’t bright.

For 2013-14, production in these sectors rose 2.6 per cent, the lowest in at least nine years. For 2012-13, core sector growth stood at 6.5 per cent.

In April, growth in electricity generation nearly doubled to 11.2 per cent, a seven-month high, against 5.4 per cent in March. Fertiliser production stood at 11.1 per cent, against 6.1 per cent contraction in March.

This growth was the highest in 10 months; it was aided by a low base (contraction of 2.7 per cent in April 2013.

In April, cement production increased a seven-month high of 6.7 per cent. In March, production in this segment was flat.

However, according to experts, the core sector data, might not augur well for the industrial production for the month. The data for industrial production is expected to be released by middle of the month.

	GROWTH IN EIGHT CORE SECTOR INDUSTRIES (in %) - YEARLY
Sector	Weight	2007-08	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14
Coal	4.379	6.3	8	8.1	-0.2	1.3	4.6	0.7
Crude Oil	5.216	0.4	-1.8	0.5	11.9	1	-0.6	-0.2
Natural Gas	1.708	2.1	1.3	44.6	10	-8.9	-14.5	-13
Refinery Products*	5.939	6.5	3	-0.4	3	3.1	29.0#	1.7
Fertilizers	1.254	-7.9	-3.9	12.7	0	0.4	-3.4	1.5
Steel	6.684	6.8	1.9	6	13.2	10.3	4.1	4.9
Cement	2.406	8.1	7.2	10.5	4.5	6.7	7.7	3
Electricity	10.316	6.3	2.7	6.2	5.6	8.1	4	5.6
Overall Index	37.903	5.2	2.8	6.6	6.6	5	6.5	2.7

Experts said the core sector data for April might not aid industrial production data for the month, scheduled to be released on June 12. “Notwithstanding the pick-up in core sector growth, IIP growth for April is expected to be sub-one per cent. Though the sentiment has improved dramatically since the strong verdict in the parliamentary elections, a sustained and broad-based improvement in manufacturing growth still appears to be some months away,” said Aditi Nayar, senior economist, Icra Ltd.

In fact, IIP data does not always move in sync with core sector data. For instance, core sector growth stood at 4.5 per cent in February, but IIP had declined 1.79 per cent.

However, some of the core sectors, such as crude oil, natural gas and refinery products declined by 0.1%, 7.7% and 2.2% respectively.

	GROWTH IN EIGHT CORE SECTOR INDUSTRIES (in %) - MONTHLY
Sector	Coal	Crude Oil	Natural Gas	Refinery Products*	Fertilizers	Steel	Cement	Electricity	Overall Index
Weight	4.379	5.216	1.708	5.939	1.254	6.684	2.406	10.316	37.903
13-Apr	1.2	-1.2	-17.4	6.2	-2.4	10.1	5.2	3.5	3.7
13-May	-3.3	-2.4	-18.7	5.5	-2	4	2.4	6.2	2.3
13-Jun	-3	-0.6	-16.7	2.3	11.3	3.4	2.3	-1.2	0.1
13-Jul	1.2	-2.3	-16.1	5.1	0.4	7	0.8	5.2	3.1
13-Aug	5.5	-1.5	-16.1	4.9	1.7	4.3	5.5	6.7	3.7
13-Sep	12.5	0.6	-14.1	8	5.3	6.6	11.5	12.6	8
13-Oct	-3.9	-0.8	-13.6	-4.8	4.1	3.5	1	1.3	-0.6
13-Nov	2.3	1.1	-11.3	-5	0.6	3.9	4.2	5.9	1.7
13-Dec	-0.6	1.6	-9.9	-1.7	4.1	3.1	1.1	6.7	2.1
14-Jan	-0.7	3	-5.2	-4.5	1.2	3.4	1.5	5.7	1.6
14-Feb	0.1	1.9	-4.4	3.2	-0.7	4.8	2.3	10.4	4.5
14-Mar	0.7	-1.6	-9.3	2.8	-6.1	5.4	0	5.4	2.5
14-Apr	3.3	-0.1	-7.7	-2.2	11.1	3.1	6.7	11.2	4.2

The contraction in crude oil generation is for the second straight month. In March also crude oil declined by 1.6%. Similarly, production of natural gas also contracted for the second time. In March it fell by 9.3%.

In April sectors such as coal and steel also rose by 3.3% and 3.1% respectively. These two sectors had registered growth even in the previous month of March when coal production rose by 0.7% year-on-year and production of steel grew by 5.4% year-on-year.

Nayar stated that mining sector growth would take a cue from resolution of issues related to land acquisition, clearances, renewal of leases and ramping up of evacuation facilities.