Aided by some base effect and a strong show by cement, coal, and natural gas sectors, the core industries’ output grew 11.6 per cent in August, official data released on Thursday showed.

This was better than the 9.9 per cent growth recorded by the eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — in July.

In August 2020, the core sector output had contracted 6.9 per cent due to the Covid-19 pandemic.

May number revised

The Ministry of Commerce and Industry has revised downwards the May output number to 16.4 per cent from the provisional 16.8 per cent announced earlier.

The eight core industries account for 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

On the sectoral front, August cement production surged a robust 36.3 per cent (contraction of 14.5 per cent in August 2020), followed by coal output 20.6 per cent (3.6 per cent in August 2020); natural gas 20.6 per cent (-9.5 per cent) and electricity generation 15.3 per cent (-1.8 per cent). Refinery products grew 9.1 per cent (-19.1 per cent) and steel 5.1 per cent (0.5 per cent).

However, fertilisers contracted 3.1 per cent (7.3 per cent) and crude oil 2.3 per cent (-6.3 per cent).


Impact on IIP

Madan Sabnavis, Chief Economist, CARE Ratings, said the core sector data continues to be driven by base effect and noted that IIP growth is expected to be 11-12 per cent this month.

“On the whole core sector growth rate is encouraging as it points to further acceleration during the course of the year as the government gets down to spending more as indicated to all ministries.

“Also, private sector investment in some pockets would increase sustaining the tempo,” he told BusinessLine .

Aditi Nayar, Chief Economist, ICRA, said that core sector growth has accelerated for the second consecutive month, despite a normalising base, although the 11.6 per cent August print “modestly trailed our expectations led by cement.”

Lull in rains helped

The pick-up to 11.6 per cent in August from 9.9 per cent in July was due to the lull in rains, which supported growth in coal, cement and electricity, as well as higher mobility that propped up the growth in petroleum refinery products, she said.

“Although core sector growth has improved, the weak trend in auto production is likely to weigh upon the manufacturing output in August, resulting in an IIP growth of around 11-12 per cent, similar to the July print,” she said.