Core sector growth at 7-month high of 5.1% in Sept

Low base, rapid expansion in coal, cement and refinery products boost production of infra industries

Indicating a turnaround in industrial growth, the eight core sectors grew by a seven-month high of 5.1 per cent in September — more than double the 2.3 per cent in August — backed by a low-base advantage and rapid expansion in coal, cement and refinery products, official data showed on Wednesday.

Before this, it was only in February 2012 that these industries had grown at a higher pace, of 6.9 per cent. In September last year, the eight core industries expanded by 2.5 per cent.

These eight sectors expanded by 3.5 per cent in the first six months this year, against five per cent in the corresponding period last year. Crude oil and natural gas production contracted in September. Coal output expanded 21.4 per cent in September, against a contraction of 18.2 per cent in September 2011.

 

A low base effect and higher dispatches due to fuel supply pacts by Coal India with power companies are given as reasons by analysts for this growth. Coal output grew 11 per cent in August.

Cement output grew 13.4 per cent due to a pick-up in construction activity in September, after showing a 0.1 per cent contraction in August.

“Cement is a seasonal component; the production goes down during the monsoon as construction activity slows,” said an analyst.

Crude oil and natural gas continued to remain in the contractionary zone. Crude oil showed negative growth for a fourth month at 1.7 per cent versus 0.6 per cent in August.

Refinery products grew a robust 11.4 per cent in September, up from 8.4 per cent in August. Natural gas output fell 14.8 per cent in September, compared to 13.8 per cent contraction in August.

Electricity generation growth has slowed in the past three months. It grew just 3.7 per cent in September, albeit up from 1.9 per cent in August. After contracting for five consecutive months, fertiliser showed a positive growth of 5.7 per cent in September.

The eight core industries have a 38 per cent weight in the Index of Industrial Production (IIP), which may show an uptick from September onwards as the low base effect comes in. The IIP grew 2.7 per cent in August, a slight recovery, given the low numbers in the previous months of this financial year.

India economy grew 5.5 per cent in the first quarter of the current year, slightly up from 5.3 per cent in the fourth quarter of 2011-12.

The second quarter of the economy is also expected to be lacklustre. However, the second half is expected to be a little better, according to analysts’ assessment.