Core sector growth slows down to 4.3% in March on high base effect

The eight core industries output growth slowed in March 2022 to 4.3 per cent, largely due a high base effect of 12.6 per cent seen in same month last year. The latest growth print was also lower than 6 per cent in February 2022.

However, the overall growth for 2021-22 came in at robust 10.4 per cent as against contraction of 6.4 per cent in previous fiscal, official data released on Friday showed. 

Meanwhile, the Commerce and Industry Ministry has revised upwards the final growth rate of core industries for December 2021 to 4.1 per cent from its provisional level of 3.8 per cent.

Coal, crude oil in contraction

For the month under review, six of the eight core industries remained in growth territory. Only coal and crude oil saw contraction at 0.1 per cent and 3.4 per cent respectively. The eight core industries have weightage of 40.27 per cent in the index of industrial production (IIP).

The six core industries that saw positive growth rate in March are natural gas (7.6 per cent); refinery products (6.2 per cent); fertilisers (15.3 per cent); steel (3.7 per cent); cement (8.8 per cent) and electricity (4.9 per cent).

Commenting on the core data numbers, Aditi Nayar, Chief Economist, ICRA, said the pace of core sector growth slowed to a sedate 4.3 per cent in March with a slowdown in five of the eight constituents amid an encouraging pickup in fertilisers, cement and electricity. Disaggregated data remained quite mixed, with a discordant contraction in coal and crude oil, interspersed with a double-digit expansion in fertilisers in March.

Relative to the pre-Covid level, six of the eight constituents except crude oil and fertilisers posted a growth in March 2022, with a robust 18 per cent expansion in electricity, she added.

“While the growth of the core sector output and non-oil merchandise exports slowed in March, several high frequency indicators witnessed an improvement, based on which we expect the YoY IIP growth to rise modestly to 3-3.5 per cent in that month,” Nayar added.

Madan Sabnavis, Chief Economist, Bank of Baroda, told BusinessLine that the first signs of the power problem that the country faces today could be seen in a decline in coal output by 0.1 per cent over 0.3 per cent growth seen in same month last year. Power growth, however, was steady at 4.9 per cent, he noted.

“We may expect growth in IIP this month to be around 2.5-3 per cent. Higher inflation with fuel prices being increased would come in the way of revival of consumption”, Sabnavis said.

The bounce back in fertilisers by 15.3 per cent may be attributed to a decline of  5 per cent last year as companies gear up for re-stocking in preparation for kharif. Also the rise in prices of fertilisers post the war has also helped in providing incentive to producers, Sabnavis added.

High growth in cement by 8.8 per can be directly attributed to the last push given by the government on infrastructure though growth in steel was weak at 3.7 per cent, according to Sabnavis.

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