India's core sector output grows 9.4% in July on the back of low base

Except crude oil, 7 sectors have shown an uptick YoY

India's output of eight core industries grew 9.4 per cent year-on-year (YoY) in July on the back of a low base as all sectors, except crude oil, registered an increase in output.

On a month-on-month basis, output rose 5.4 per cent in July, after growing 1.5 per cent in June.

The data released by the Department for Promotion of Industry and Internal Trade on Tuesday revealed that the output of core sectors had registered a 7.6-per cent decline in July 2020 due to Covid-19-related restrictions.

The index grew 1.1 per cent, compared to July 2019, mainly on the back of a sharp jump in coal and cement production. Crude oil output, however, is yet to reach pre-pandemic levels.

The eight sectors - coal, steel, cement, fertiliser, electricity, natural gas, refinery products, and crude oil - comprise nearly two-fifths of India's total industrial production.

Production of cement, natural gas, coal, steel, electricity, refinery, and fertiliser witnessed a growth of 21.8 per cent, 18.9 per cent, 18.7 per cent, 9.3 per cent, 9 per cent, 6.7 per cent, and 0.5 per cent, respectively, in July, compared to last year. Crude oil production contracted 3.2 per cent, following the same trend for over a year.

The production levels of crude oil, natural gas, fertiliser, steel, and electricity saw higher levels of production, compared to pre-Covid levels.

Sunil Kumar Sinha, principal economist at India Ratings & Research, said the latest data depicts that the overall index had lost some ground in May and June on the back of Covid 2.0, but had crossed the two-year ago production levels in July.

Sinha further said that the recovery after the second wave has been swifter, compared to the first one. “Barring crude oil and petroleum refinery products, all other core segments have exceeded the two-year ago production levels. Interestingly, before the second wave, the production levels of only three core sectors had surpassed the two-year levels in March, which is half of what was observed in July,” he said.

Given the uncertainty around an impending third wave, it is still early days in calling out a meaningful recovery from the latest numbers, he cautioned.

During April-July, core sector output grew 21.2 per cent, compared to the same period a year-ago. The government revised the final growth rate of the index for April to 62.6 per cent, from its provisional level of 56.1 per cent.

“The cumulative index for the period so far in 2021-22 is lower by 2.8 per cent than the index for the corresponding period in 2019-20 prior to the onset of the pandemic. This is indicative of the fact that even though the economy has been showing signs of improvement, it is still far from achieving the pre-pandemic levels of industry activity. Natural gas, steel, and cement have witnessed double-digit growth purely on account of a base-effect phenomenon,” said CARE Ratings in a note.