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The output of eight core industries’ grew 8.9 per cent in June largely due to base effect , official data showed on Friday.
The latest print was, however, much lower than the 16.3 per cent growth recorded in May and 60.9 per cent in April, reflecting the waning of the high-base effect. In June 2020, at the height of the Covid first wave and the nation-wide lockdown, the output of the eight core industries had contracted 12.4 per cent.
For the first quarter this fiscal, the eight core industries’ output — which accounts for nearly 40 per cent of the Index of Industrial Production (IIP) — grew 25.3 per cent on a year-on-year basis, data released by the Commerce and Industry Ministry showed.
Contraction in crude
In June, only crude oil saw a contraction of 1.8 per cent while the other seven core industries — coal, natural gas, refinery products, fertilisers, steel, cement and electricity — saw output growth on a year-on-year basis.
The core industries’ output for June is still lower than the pre-Covid period of June 2019. This is true even for the cumulative output in the first quarter this fiscal vis-a-vis the growth seen in April-June 2019. In June, the coal output grew 7.4 per cent, while natural gas and refinery products expanded 20.6 per cent and 2.4 per cent respectively. Steel output saw a robust 25 per cent surge, while cement and electricity grew 4.3 per cent and 7.2 per cent, respectively, official data showed. Fertilisers output grew 2 per cent in June 2021 on a year-on-year basis.
Madan Sabnavis, Chief Economist, CARE Ratings, said the core sector growth for June has once again been influenced by the negative base effect syndrome that will continue to dominate most economic data.
Effect on IIP
The growth in fertilisers has turned positive again, which is on expected lines. Also, the growth in steel at 25 per cent and cement at 4.3 per cent should be juxtaposed with the fiscal numbers of the government where the capex spending was slightly lower in terms of proportion of budgeted number this year. “IIP growth would also be in the region of 15-20 per cent in June. But not much should be read into it given that PMI-Manufacturing was less than 50,” he added.
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