Aided by strong show in coal and cement sectors besides some negative base effect, the output of eight core industries grew 9.4 per cent in July 2021 on a year-on-year basis, official data showed on Tuesday.
Except for crude oil output, which saw a contraction, all the seven other core industries recorded a year-on-year (Y-o-Y) growth for the month under review.
The latest eight core industries’ print was higher than the 9.3 per cent growth recorded in June 2021 and better than the contraction of 7.6 per cent recorded in July last year.
Meanwhile, the government has now revised upwards the April 2021 core industries’ growth to 62.6 per cent from 56.1 per cent estimated earlier. In May this year, the eight core industries’ —coal, crude oil, refinery products, natural gas, fertilisers, steel, cement and electricity — output had recorded 16.3 per cent growth.
For April-July 2021, the eight core industries’ output grew 21.2 per cent as against a contraction of 19.8 per cent in the same period last year, an official release said.
While the coal sector output for July 2021 grew 18.7 percent (7.4 percent in June 2021), the cement sector output saw a growth of 21.8 per cent in the same month (7.5 per cent in June 2021). Crude oil output contracted 3.2 per cent as against a contraction of 1.8 per cent recorded in the previous month.
Natural gas output for the month under review grew 18.9 per cent (20.6 per cent in June 2021) while refinery products output grew 6.7 per cent (2.4 per cent). Steel output in July 2021 grew 9.3 per cent (24.9 per cent growth in June 2020) and electricity generation increased 9 per cent (8.2 per cent in June 2021).
Experts’ take
Madan Sabnavis, Chief Economist, CARE Ratings, said that the higher growth of core industries output in July 2021 was due to a combination of two factors: negative base effect and some affirmative action by the government on infra.There was a sharp rise seen in cement and steel which can be related to the infra push given by the government as revealed by higher capex in the fiscal numbers just released, he said. “Based on this growth rate of 9.4 per cent, we can expect IIP growth in July to be between 12-14 per cent,” Sabnavis added.
Aditi Nayar, Chief Economist, ICRA, said, “The core sector growth barely budged to 9.4 per cent in July 2021 from 9.3 per cent in June 2021, with an unfavourable base absorbing the positivity engendered by the further lifting of restrictions on economic activity and mobility. On a disaggregated basis, half the sectors recorded an improved Y-o-Y growth in July 2021 (coal, electricity, refinery, cement), even as crude oil continued to contract.”
“We expect the deep 25 per cent shortfall in rainfall relative to the long period average to prop-up the performance of various core sectors in August 2021, such as coal, cement, steel and electricity, given the extended window for mining and construction activities as well as requirement to use electricity to draw ground water for irrigation. Accordingly, we expect the core sector growth to rise to 14-16 per cent in August 2021,” she added.