Eight core sectors' output accelerates to 11.6% in August: Govt data

The core sector in August this year recorded a 3.9 per cent rise from the pre-covid August 2019 too

The output of India’s eight core industries grew by 11.6 per cent in August compared with 9.9 per cent in the previous month even as the base effect was less beneficial.The core sector, comprising coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity, had contracted 6.9 per cent in August last year, as against 7.6 per cent in July.

The core sector also recorded a 3.9 per cent rise from the pre-Covid level of August 2019. Only the production of refinery products and crude oil was lower over this period. However, the overall output was still lower by 0.3 per cent when compared to the February 2020 level.

The picture at disaggregated level is more encouraging, said Sunil Kumar Sinha, principal economist at India Ratings. Except coal, refinery products, and cement, all other core industries surpassed the pre-Covid level on this parameter.

Industries that showed higher output levels than in February 2020 were crude oil (105 per cent), natural gas (126.3 per cent), fertilisers (108.5 per cent), steel (103.5 per cent) and electricity (122.2 per cent), said Sinha. He believed that core sector industries would cross the pre-Covid level of production at an aggregate level next month.

Two industries -- crude oil and fertilisers -- saw a decline in their production in August, as against only one (crude oil) in July. There are reports of fertilser shortage faced by farmers ahead of rabi sowing in various parts of the country.

Cumulatively, core sector output grew at 19.3 per cent in the first five months of the current financial year, as against 17.3 per cent contraction in the corresponding period of the last financial year.

India Ratings believed that the Index of Industrial Production (IIP) would also show an encouraging trend in August.

The core sector has 40.3 per cent weighting in the IIP. Industrial production growth declined to 11.5 per cent in July from 13.5 per cent in June because of the normalisation of the base.

ICRA in a note said although core sector growth had improved, the weaker trends in auto production were likely to weigh upon the manufacturing output in August 2021, resulting in IIP growth of around 11-12 per cent, similar to the July 2021 print.

It also warned that the August gains in sectors such as mining, construction, and electricity were likely to be washed out by the September rains, exacerbating the impact of the normalising base.