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An increase in cement and coal production pushed core sector growth to 4.7 per cent in April, compared to 2.6 per cent in the same month last year. The core sector growth was at 4.4 per cent in March this year.
The core sector comprises eight key industries and contributes over 40 per cent to overall industrial production.
According to data released by Commerce and Industry Ministry, while cement production increased by 16.6 per cent in April this year over April last, coal production went up by 16 per cent during the same period. Higher cement outgo indicates construction sector is accelerating and this is good news for the entire economy, especially from employment point of view as construction sector has very high potential to create direct and indirect employment.
Increase in coal production has come at a time when there is higher demand from the power sector There is also an indication that if production continues at the same rate during the coming months, the electricity situation will improve. Meanwhile, electricity generation increased by 2.2 per cent in April. Its cumulative index increased by 5.3 per cent during April-March, 2017-18 over the corresponding period of previous year.
Fertilizers production went up by 4.6 per cent in April while steel production increased by 3.5 per cent. Among petroleum products, natural gas and refinery production went up by 7.4 per cent and 2.7 per cent respectively. However, crude production declined 0.8 per cent.
Base effect
Commenting on the core sector data, Aditi Nayar, Principal Economist with ICRA, said a favourable base effect boosted the core sector growth. The underlying trends are favourable with a sequential dip in growth in only two of the eight constituents, and only one sector displaying a contraction, amid double-digit expansion in cement and coal.
She also said that the low base of April 2017 pushed the expansion in coal output to a high of 16 per cent, which would support mining growth in that month. The weak performance of the coal sector in May-June 2017, suggests a moderate growth outlook for the coming two prints.
“Despite the surge in the expansion of coal output, growth of electricity generation eased in April 2018 relative to the March 2018 levels. According to data released by the Central Electricity Authority, hydro electricity generation contracted by a sharp 26 per cent in April 2018. The y-o-y decline in reservoir levels suggest that hydro generation would continue to contract over the next two months,” she said.
The pickup in the pace of growth of the core sector and non-oil merchandise exports, as well as the favourable base effect, suggest a mild recovery in the industrial growth in April 2018, led by mining and manufacturing, she said.
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