Eight core industries’ output growth hit a three-month high of 6.7 per cent in February 2024, reversing a slowing growth trend seen in January 2024 and December 2023 at 4.1 per cent and 4.9 per cent, respectively.

Also, cumulative growth in core industries in April-February 2024 is at 7.7 per cent, albeit lower than 8.2 per cent in the same period last fiscal year, official data released on Thursday showed.

For the month under review, seven of the eight core industries output were in positive territory. Only fertilisers saw a contraction of 9.5 per cent. 

The eight core industries — coal, natural gas, crude oil, refinery products, fertilisers, cement, steel, and electricity — combine 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

The government has revised the output growth upwards for the eight core industries for November 2023 to 7.9 per cent. Last month, the government revised the core industry print for October 2023 and earlier for September 2023.

In February 2024, Coal sector output grew 11.6 per cent (9 per cent in February 2023); Crude oil at 7.9 per cent (-4.9 per cent); Natural gas at 11.3 per cent (3.1 per cent); refinery products at 2.3 per cent (3.3 per cent); fertilisers at -9.5 per cent (22.2 per cent); cement at 10.2 per cent (7.4 per cent); steel at 8.4 per cent (12.4 per cent); and electricity at 6.3 per cent (8.2 per cent)

IIP expansion

Aditi Nayar, Chief Economist, Head Research and Outreach, ICRA Ltd., said that the core sector growth in February 2024 was boosted by a sequential improvement being recorded by six of its eight constituents, other than fertilisers and steel, which may partly reflect the extra day in the leap month. 

“Notably, while growth in steel output dipped only mildly and remained healthy at 8.5 per cent in February 2024, the y-o-y contraction in the output of fertilisers deepened sharply to 9.5 per cent from 0.6 per cent. On a positive note, three of the eight core industries displayed a double-digit expansion in February 2024, namely, coal, cement, and natural gas,” Nayar added.

“Given the healthy improvement in core sector growth, we expect the IIP to record an expansion of 6.0-6.5 percent in February 2024.”

Madan Sabnavis, Chief Economist, Bank of Baroda, said there has been all-round performance across the 8 sectors, barring fertilisers. Contraction in fertilisers can be explained by the high base effect as well as the fact that this is the period of harvest where there is less demand for the products, he said.

“IIP growth can be expected to be good at between 4-5 percent which is also reflected in growth in electricity at 6.3 percent. 

Coal growth of 11.6 percent has been impressive, which has been the trend all through the last 11 months,” he said.