Core industries’ growth improves to 4.7 per cent in March

The eight core industries’ output grew 4.7 per cent on a year-on-year (YOY) basis in March, higher than 4.5 per cent recorded in the same month last year.

The latest print was the best reading in the last five months and also higher than the 2.2 per cent level recorded in February.

The overall performance was bolstered by strong show in cement, steel, fertiliser and refinery products.

For the entire fiscal 2018-19, the eight core industries’ output growth remained flat at 4.3 per cent, official data released on Tuesday showed.

The eight core industries are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.

Coal generation growth in March was flat at 9.1 per cent. Natural gas, refinery products, fertiliser, steel and cement sectors recorded positive growth rates.

Crude oil production, however, contracted 6.2 per cent in March. Electricity generation output growth sharply slowed to 1.4 per cent during the month under review.

Experts’ take

Madan Sabnavis, Chief Economist, CARE Ratings, said the core sector data shows some recovery in production of infrastructure industries in March. This can be partly attributed to meeting of target by most companies in the respective sectors.

Cement and steel continue to do well due to the final thrust given by the government on infra, especially road construction, he said.

The disappointment was due to low growth in electricity which was low for the third successive month reflecting the problems that exist especially in distribution and which have reflected in production in these three months. This needs to be addressed in 2019-20, he said.

“Given the core industries growth of 4.7 per cent in March we may expect IIP growth of between 4 and 4.5 per cent (for March) and overall growth for the year also being in this range,” Sabnavis said.

Sunil Kumar Sinha, Director-Public Finance & Principal Economist, India Ratings, said all segments of the core industries, except crude oil, recorded positive growth ranging between 1.4 per cent and 15.7 percent in March.

“Growth performance of cement followed by coal and steel was the most pronounced in March. Even on a cumulative basis the three segments stand out for 2018-19. It appears that government capex spending has clearly helped cement and steel sectors,” Sinha said.

Though some segments of the core sector are doing well, at an aggregate level it is still falling short of expectations and is likely to remain so in the future. However, impetus to core segment may come once the new government takes charge in May, Sinha said.

The core segments that have performed erratically on monthly and poorly on annual basis in 2018-19 are crude oil, natural gas and fertiliser. Performance of the electricity segment has also been moderate in 2018-19, Sinha pointed out.

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