Coal and crude oil puncture the growth of core sector

The production growth of core sector, comprising eight infrastructure sectors (coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity), slowed down to 4.3 per cent in March due to a decline in the output of coal and crude oil, data released by the commerce and industry ministry shows.

The core sector had grown by 6.2 per cent in February. To elaborate it, the output of coal and crude oil contracted by 0.1 per cent and 3.4 per cent in March. The cumulative growth rate of Index of eight core industries (ICI) stood at 10.4 per cent during April-March 2021-22.

The degrowth was caused by the slowdown in five of the eight constituents amid an encouraging pickup in fertilisers, cement and electricity. Disaggregated data remained quite mixed, with a discordant contraction in coal and crude oil, interspersed with a double-digit expansion in fertilisers in March.

Interestingly, compared to the pre-Covid level, six of the eight constituents except crude oil and fertilizers posted a growth in March, with a robust 18 per cent expansion in electricity. The YoY performance of cement and steel diverged in March relative to the previous month, with a pickup in the former (to 8.8 per cent from 5.0 per cent) and a slowdown in the latter (to 3.7 per cent from 5.9 per cent).

The double-digit growth recorded by fertilizer output in March came on the back of a very low base. In spite of the pickup in mobility, the growth in output of refinery products moderated in March. While the growth of the core sector output and non-oil merchandise exports slowed in March, as per Icra, several high frequency indicators witnessed an improvement, based on which we expect the YoY IIP growth to rise modestly to 3-3.5 per cent in that month.

Not to mention, the eight infrastructure sectors had expanded by 6 per cent in February. Refinery products and fertilizers output grew by 6.2 per cent and 15.3 per cent respectively in the month under review. The output of coal and crude oil contracted by 0.1 per cent and 3.4 per cent in March.

The production of natural gas, refinery products, fertilizers, steel, cement and electricity industries increased in March over the corresponding period of last year. Growth of the eight core sectors in February has been revised to 6.0 per cent from 5.8 per cent earlier while growth in the final growth rate for December is revised to 4.1 per cent from its provisional level of 3.8 per cent.

With the shortage of power supply in various parts of the country due to the coal shortage, the picture appears to be bleak when the official data is released for April by the month-end. One can only hope that the government will ensure that the growth of the core sector comes back on the right track when the country was heading to become a $5-trillion economy.