Core sector output rises 8.9% YoY in June, sequential growth 1.1%

The output of the eight-industry core sector grew 8.9 per cent year-on-year in June, as the impact of a low base continued to linger, data released by the commerce and industry ministry showed.

However, the impact of a low base fell substantially in June as compared to April and May, when the growth was 60.9 per cent and 16.3 per cent, respectively.

In June 2020, the core sector output contracted 12.4 per cent due to the restrictions imposed across the country to control the spread of Covid-19.

On a sequential basis, the core sector output, captured by the index of eight core industries (ICI), grew 1.1 per cent, even as several states across the country kickstarted the unlock process, after the imposition of localised lockdown to curb the second wave of the pandemic. Besides, the ICI continued to remain below April's level.

“While the core index rose in MoM terms in June 2021, it remained below the April 2021 level, particularly on account of cement, electricity and petroleum products, consistent with the picture of an incomplete recovery revealed by various other high frequency indicators. Moreover, the core sector index in June 2021 was a moderate 4.7% lower than the pre-covid level of June 2019, on account of all the components except fertilisers and natural gas,” Aditi Nayar, Chief Economist at ICRA said.

During April-June, the core sector output grew 25.3per cent as compared to the same period a year ago, data showed.

“For Q1 FY2022 as a whole, the core sector recorded a base-effect led YoY expansion of 25%, while remaining 4.5% lower than the pre-Covid level of Q1 FY2020, reflecting the impact of the second wave of Covid-19 on economic activity,” Nayar said.

The eight sectors--coal, steel, cement, fertilizers, electricity, natural gas, refinery products, and crude oil--comprising nearly two-fifths of India's total industrial production. Out of the eight sectors, barring crude oil, all sectors registered positive growth in June as compared to a year ago period.

Production of coal, natural gas, refinery, fertilizer, steel, electricity and cement witnessed 7.4 per cent, 20.6 per cent, 2 per cent, 25 per cent, 7.2 per cent and 4.3 per cent respectively in June as compared to last year. Crude oil production contracted 1.8 percent, following the same trend over a year now,

“Growth in steel at 25% and cement at 4.3% should be juxtaposed with the fiscal numbers of the government where the capex spending was slightly lower in terms of proportion of budgeted number this year,” Madan Sabnavis, chief economist at CARE Ratings said.