Sept core sector growth signals infra recovery

At year's high of 8%; electricity, cement and coal rise in double digits

In early signs of industrial recovery, data for the eight core sector industries’ growth in September showed a year’s high of eight per cent, against 3.7 per cent in August.

Signalling recovery in the infrastructure sector, this was aided by good performance in the electricity, cement and coal segments, which rose in double digits, showed the data issued by the Ministry of Commerce and Industry. In the same month last year, the core sector had recorded 8.3 per cent growth, the highest since January 2009-10.  

“These numbers have come as a surprise but I believe core sector numbers are volatile and we will have to wait for the numbers in coming months,” said D K Joshi, chief economist at CRISIL.

Madan Sabnavis, chief economist at CARE Ratings sais, “It is the first sign of recovery. There is credit growth among industries and this is an encouraging sign.”  He noted this was despite a high base in the same month of 2012-13.

Electricity, which occupies the largest share among the eight core sectors, grew at a massive 12.6 per cent in September, compared with 3.9 per cent in the year-ago period. Cement grew 11.5 per cent against 13.8 per cent in the same period last year and steel at 6.6 per cent, against 1.3 per cent in September 2012-13.

Sabnavis said expansion in the output of steel and cement reflected a pick-up in infrastructure activity.

Besides these, coal output rose 12.5 per cent in September, against 22.2 per cent in the same month last year. This, experts said, is a consequence of the resolution of the tightened mining laws. The output of refinery products went up by eight per cent, over a high 34.9 per cent growth in September 2012.

However, contraction in output of natural gas continued this month as well, at minus 14.1 per cent against a contraction of 14.8 per cent earlier. Natural gas has been contracting since December 2010. Crude oil output, after declining for five months, rose moderately by 0.6 per cent, against a contraction of 1.8 per cent in the same month last year.

The core sector contributes around 37 per cent to the Index of Industrial Production (IIP) and economists said these figures would have a positive impact on the latter. “IIP numbers will definitely be better than what we saw in the previous month,” said Joshi.

Industrial output grew at a sluggish 0.6 per cent in August when the core sector had expanded at a seven-month high of 3.7 per cent.

Experts are optimistic of a consumption revival in the coming months as well because of the festive season.

The September data has taken overall growth in the core sector in April-September to 3.2 per cent this year against 6.6 per cent in the same period last year.