Core sector output accelerates to 6.3% in October

Pick up in coal and electricity generation aided growth the most

Growth in eight key infrastructure sectors reached an impressive four-month high of 6.3 per cent in October compared to 1.9 per cent the previous month but analysts said expansion in industrial production was still likely to be mild.

The October growth was mainly due to a surge in coal production, electricity generation and refinery products.

The eight (core) sectors' output rose 4.3 per cent in the first seven months of this financial year, slightly higher from 4.2 per cent in the same months of last year.

During the month, coal production grew 16.2 per cent, closely followed by electricity generation that rose by 13.2 per cent. Production of petroleum refinery products grew by 4.2 per cent compared to the corresponding month of 2013-14, according to data issued on Monday by the ministry of commerce and industry.

However, “the double-digit growth of coal and electricity in October benefits from a benign base effect and might not sustain at such healthy levels,” said Aditi Nayar, senior economist with ICRA India.

In October 2013, production of coal shrank 3.9 per cent and of electricity generation by 1.3 per cent. Total core sector output in October last year fell 0.6 per cent.

Nayar said the pick-up in core sector growth would partly offset the disappointing performance of merchandise exports and automobile production in October, as well as the impact of fewer working days on account of earlier onset of the festive season. “Nevertheless, the IIP (Index of Industrial Production) growth print is expected to be muted in October,” she said. The core sector has almost 38 per cent weight in the IIP.

Sectors that saw contraction were fertiliser, by seven per cent, followed by natural gas and cement by 4.2 per cent and one per cent, respectively. Steel and crude oil production also rose by a mere 2.3 per cent and one per cent, respectively, in October.

Madan Sabnavis, chief economist, CARE Ratings, said growth in the key infrastructure sectors in October would translate into an expansion of two to four per cent for the industrial production index.

“The core numbers are fairly ambivalent. The numbers are all coming over a low base effect. There is no real turnaround of the economy. Sectors such as steel and cement that go into construction are also showing a stable growth rate,” he added.

Sabnavis said the IIP numbers in October are also expected to be mild, owing to poor growth in the automobile sector. Merchandise exports fell five per cent, while car sales fell for a second month in a row, by 2.6 per cent.

	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
14-May	5.5	-0.3	-2.2	-2.3	17.6	-2	8.7	6.3	2.3
14-Jun	8.1	0.1	-1.7	1.2	-1	4.2	13.6	15.7	7.3
14-Jul	6.2	-1	-9	-5.5	-4.2	-3.4	16.5	11.2	2.7
14-Aug	13.4	-4.9	-8.3	-4.3	-4.3	9.1	10.3	12.6	5.8
14-Sep	7.2	-1.1	-6.2	-2.5	-11.6	4	3.2	3.8	1.9
14-Oct	16.2	1	-4.2	4.2	-7	2.3	-1	13.2	6.3