Core sector output growth slows to six-month low of 3.5% in April

The growth rate of the index of eight core industries (ICI) during 2022-23 was 7.7% (provisional), the ministry said in a release

Growth in eight infrastructure industries — the core sector — slowed to a six-month low at 3.5 per cent in April, with the production of natural gas and refinery products slipping for the first time in five months and crude oil output falling for the 11th consecutive month.

Contraction in the electricity sector (-1.4 per cent) continued for the second month in April amid unseasonal rainfall.

Madan Sabnavis, chief economist, Bank of Baroda, said the contraction in the electricity output was due to a higher base. “But this is also reflective of a lower level of industrial activity which has brought down demand. Domestic demand would have varied due to extreme conditions witnessed in different parts of the country. Unseasonal rainfall lowered the need for cooling.”

The data released by the industry department on Wednesday showed that the output of fertilisers witnessed the biggest jump -- 23.5 per cent -- in April; growth was also reported in the output of steel (12.1 per cent), cement (11.6 per cent), and coal (9 per cent).

The growth rate of the index of eight core industries (ICI) during 2022-23 was 7.7 per cent (provisional), the ministry said in a release.

The index of eight core industries measures the output of key infrastructure sectors -- coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity. These sectors have a 40 per cent weighting in the Index of Industrial Production (IIP).

“The oil basket -- crude, natural gas, and refined products -- witnessed contraction, reflecting lower demand. Benign global crude prices tend to lower production of domestic crude oil as imports are preferred. Based on these numbers, Index of Industrial Production (IIP) growth would tend to be in the range of 2-3 per cent,” Sabnavis said.

Sunil Sinha, principal economist, India Ratings (Ind-Ra), said that sustained capex push by governments (both state and Union) helped the steel and cement sectors. “All in all, the recovery in infrastructure industries is showing flashes of good growth, but it is yet to become sustained, pervasive and broad-based. The output of two sectors (coal and crude oil) is still trailing the pre-Covid level output (February 2020). Ind-Ra expects the core sector to record YoY growth of around 4-5 per cent in May 2023,” he added.