Reflecting a rebound in economic activity and aided by a good show from coal, fertiliser, electricity and cement sectors, the output growth of eight core industries hit a 13-month high of 18.1 per cent in May 2022. 

The latest output growth print was higher than the 16.4 per cent growth in May 2021 and the revised 9.3 per cent growth recorded in April 2022.

For the first time in several months, all eight core industries’ output growth on a year-on-year basis remained in positive territory. The eight industries that saw positive growth rate in April are: coal (25.1 percent); crude oil (4.6 per cent); natural gas (7 per cent); refinery products (16.7 per cent); fertilisers (22.8;per cent); cement (26.3 per cent); and electricity (22  per cent).

The y-o-y growth in electricity generation doubled to 22 per cent in May 2022 from 11.8 per cent in Apr 2022, echoing the rise in demand stemming from heat wave conditions in parts of North-West and Central India, as well as some pick-up from commercial and industrial establishments. 

The eight core industries have weightage of 40.27 per cent in the index of industrial production (IIP).

Meanwhile, the Commerce and Industry Ministry has revised upwards the final growth rate of core industries for February 2022 to 5.9 per cent from provisional level of 5.8 per cent. The growth rate of ICI during April-May 2022-23 was 13.6 per cent (P), compared to the corresponding period of last financial year.

Last month, the growth output of core industries for January 2022 was revised upwards. The core output for December 2021 was earlier revised upwards to 4.1 per cent from its provisional level of 3.8 per cent.

Aditi Nayar, Chief Economist, ICRA, said the core sector growth for May 2022 printed at a robust, but optically misleading 18 per cent, boosted by the low base of the second wave of Covid-19, and coming in at the lower end of ICRA’s expectations range of 18-20 per cent. 

The disaggregated data showed a broad-based improvement in the y-o-y growth, benefitting from the low base, with the exception of coal, which nevertheless continued to record a high growth, she added.

Compared to the pre-Covid level, the core index reported a growth of 8.1 per cent in May 2022, led by all the constituents except crude oil. Enthusingly, fertiliser, coal, cement and electricity output displayed a double-digit expansion in May 2022 over the May 2019 levels, said Nayar.

“We expect the IIP to expand by 16-19 per cent in May 2022, benefitting from the high growth in the core sector as well as various other high frequency indicators,” she said.

India Ratings’ Sunil Kumar Sinha and Paras Jasrai said in a note that the support to growth was fairly broad based as except crude oil production all the other core sectors recorded robust growth. Even crude oil output witnessed a positive growth of 4.6 per cent yoy after a gap of 53 months. “Positive crude oil production is good news at a time when the country is facing headwinds due to elevated global crude oil price and its related ramifications on the economy,” said the note.

Notably, output growth in cement, electricity petroleum and refinery products and steel were on a high base and are at a 9-month, 13-month and 13-month and 11-month high respectively. 

Robust growth in the cement and steel sector indicates pick up  in construction sector which is the second largest employment provider after agriculture. The support mainly came from the government as the capex by the union government grew by a strong 70.1 per cent yoy in April-May 2022, the India Ratings note added.

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