Core sectors' output soars by 56.1% in April due to low base effect

But it is down 15% sequentially due to second wave

Growth in the eight core sectors rose sharply by 56.1 per cent year-on-year (YoY) in April, mainly due to the low base effect, data released by the commerce and industry ministry showed on Monday.

Growth in April, 2021 was also driven by a massive jump in steel and cement output. Core sector output in April 2020 shrank by a record 37.9 per cent, as factories remained clo­sed across the country and production came to a virtual halt. This was due to the imposition of a Covid-induced lockdown during April-May last year.

However, on a sequential basis, core sector output, as captured by the index of eight core industries (ICI), declined 15 per cent in April as compared to March, mainly due to the outbreak of the second wave of the pandemic. This resulted in state-wise lockdowns across the country starting mid-April.

Core sector growth has also been revised for March to 11.4 per cent from 6.8 per cent due to higher coal production.

“Core infrastructure industries data is the first set of information of FY22 with regional/­localised lockdowns. April 2021 growth is high due to the weak base. However, this data suggests that while all states individually implemented lockdowns, these are not as stringent as the nationwide lockdown of April and May 2020,” Devendra Kumar Pant, chief economist, India Ratings & Research said.

Updated figures released by the government on Monday showed that core sector output in 2020-21 witnessed a degr­owth of 6.5 per cent due to the disruption caused by the pandemic.

In the previous year, growth stood at 0.4 per cent, largely due to the economic slowdown.

The eight core sectors — coal, steel, cement, fertilisers, electricity, natural gas, refinery products, and crude oil — comprise nearly two-fifths of India's total industrial production. Of the eight sectors, all except crude oil registered positive growth in April.

Steel and cement output grew 400 per cent and 548.8 per cent, respectively, as it plu­m­meted last year with industry activity coming to a near-halt. Crude oil output contracted 2.1 per cent. On the other hand, steel output declined by a fifth on a sequential basis, amid rising Covid cases and use of liquid oxygen for patients fighting coronavirus, thereby affecting its production. Similarly, cem­ent output declined in April as compared to March, owing to the restrictions imposed due to regional lockdowns.

Crude oil output contracted 2.1 per cent. “This fall can be ascribed to the less-than-planned contribution from workover wells, drilling wells and old wells by government-owned oil companies. Prod­uction by private companies or joint ventures was marginally lower on YoY basis, due to few wells being under maintenance. Also, because some were not producing due to possible casing damage, snap­ped/unscrewed sucker rod string and unavailability of effective demulsifier,” CARE Ratings said in a note.

Experts said a low base will also result in a sharp growth in the index of industrial production (IIP) in April.“We expect the IIP to record a transient sp­ike to a 130-150 per cent expansion in April 2021, followed by a moderation in May 2021 in line with the proliferation in state-wise restrictions,” said Aditi Nayar, chief economist, ICRA.

Pant, however, cautioned that weak demand conditions are unlikely to keep the growth momentum strong in the next few months.