Eight core sectors' output grows to 7.5% in October

The eight-industry core sector grew 7.5 per cent in October, against a seven-month low of 4.5 per cent in September, in response to the demand during the festival season and on the back of appreciable increases in the production of cement, coal, refinery products, and electricity.

This presents a better outlook for the industry in the third quarter, compared with the previous two quarters, if the trend persists, the issue of chip shortage for the automotive sector is addressed, and Omicron does not rear its ugly head in India. The eight core industries comprise 40 per cent of the weight of items included in the Index of Industrial Production (IIP).

Industrial growth in the economy is yet to pick up pace. Although the industry grew 6.9 per cent in the second quarter of 2021-22 (FY22) year-on-year, its growth was just 3.7 per cent, compared with the corresponding pre-Covid period, according to the gross domestic product (GDP) numbers released by the National Statistical Office.

However, core sector and IIP reflect numbers in volume terms, while GDP is a value addition. The same volume of sale of two different goods may not always result in the same addition to GDP.

The core sector grew 6.9 per cent, compared with the pre-Covid month of October 2019.

A part of the growth in October could also be attributed to a 0.5 per cent contraction in the corresponding month of the previous year. On the other hand, the core sector grew 0.6 per cent in September 2020.

However, the index of the core sector at 136.2 points was the highest in October in FY22. While only one industry — crude oil — showed a contraction in output in October, a trend that was visible in September too, it was refinery products and coal which trailed October 2019 levels, which was a pre-Covid period.  

Sunil Kumar Sinha, principal economist at India Ratings & Research, said the core sector output is gradually inching towards pre-Covid levels, but the output of the coal sector — fraught by excessive rainfall in September — is yet to recover.    

In the first seven months of FY22, the sectors’ output rose 15.1 per cent, compared with a contraction of 12.6 per cent in the same period of the previous year.