Core sector grows by 6.5% in October

Eight core sector industries register eight-month high growth driven by coal, petroleum refinery

Providing a ray of hope to the battered economy, the eight core sectors grew by eight-month high of 6.5% in October, 2012-13 as against 0.4% for the same period last year.

The sectors, which have around 38% weight in the Index of Industrial Production (IIP) grew by a seven-month high of 5% in September and by 2.3% in August.

However, high core sector growth is no guarantee of robust industrial production data. For example, industrial production contracted 0.4% in September despite high growth in core sector. Much depends on the capital goods sector, which has been showing consistent contraction.

Official data released today showed that eight core industries--coal, crude, refinery products, cement, natural gas, fertilisers, steel, electricity -- grew 3.7% in the first seven months of this fiscal as against 4.3% in the corresponding period of the previous fiscal.

Coal output continued to show consistent growth with a growth of 10.9%. However, it was lower on a monthly basis than the growth of 21.4% in September.

The other sectors that contributed to the robust growth were refinery products (20.3%), steel (5.9%) and cement (6.8%).

Crude oil and natural gas continued to remain in the contractionary zone. Crude oil showed negative growth for the fifth consecutive month at 0.4% versus 1.7% in September.

Natural gas production fell by 14.9%. Natural gas production declined 14.8% in September too. Natural Gas output has been contracting for over a year now.

Before this, it was only in February, 2012 that these industries grew at higher pace of 6.9%.

Low base effect and higher dispatches due to fuel supply agreement by Coal India with power companies are cited as reasons for this substantial growth by analysts.

Cement production saw a fall of 6.8% from the robust growth of 13.8% in September.

Electricity generation picked up, growing by 5.2% after growth in the sector had slowed down in the past three months. It grew just 3.9% in September, albeit up from 1.9% in August.

Fertilisers again showed a positive growth of 2% after a growth of 5.7% in September that was preceded by contraction for five months.