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Eight core industries' output rose 8.9% YoY in June, data show

The cumulative output of the core sector industries in the first three months of FY22 has risen by 25.3 percent, as compared to a 23.8 percent fall in the same period of the previous financial year.

July 30, 2021 / 05:33 PM IST
Coal power plant (Representative Image: Getty)

Coal power plant (Representative Image: Getty)

Led by a continuing low-base effect, the combined output of the eight core sector industries rose by 8.9 percent in June, as compared to a year ago. Core sector output had risen by 16.3 percent in the previous month of May, following a massive 60.9 percent rise in April.

The data released by the commerce and industry ministry on July 30 showed production declined in just one out of the eight core sector industries - crude oil.

The eight core industrial of coal, crude oil, natural gas, refinery products, steel, cement, fertiliser and electricity have a combined weight of over 40 percent in the Index of Industrial production, or IIP.

In June, production of finished steel rose the highest, rising by 25 percent following a 55 percent rise in April due to the low-base effect. Most smelters and steel factories were closed in May, 2020 owing to the nationwide lockdown. The performance of steel which was likely to have been driven by healthy exports, exceeded forecasts, economists had said earlier.

Elsewhere in the infra space, cement production rose by a smaller margin of 4.3 percent, lower than the 8.3 percent seen in May. This may reflect the impact of the second COVID surge on rural demand, as well as the year-on-year decline in the government's capital outlay in June 2021.

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Cement and steel are considered better indicators of industrial activity as they are vital to a number of industries. Their production moves in line with the demand from industries dependent on them.

In the energy space, crude oil production continued to contract, falling by 1.8 percent in June. Crude production has reduced for more than 15 months now but the rate of fall has continued to get smaller.

A similar entrenched slowdown  was also experienced by the petroleum refining sector till March. In June, it grew by 2.4 percent, after a 15.3 percent rise in May.

India's oil demand had fallen in the initial days of the pandemic due to the nationwide lockdown closing down factories. Before that, the continued contraction had led to experts suggesting the deep lack of demand was symptomatic of sustained slowdown in overall industrial activity.

However, after rising suddenly in March, natural gas production has continued to climb up. Gas production rose by 20.6 percent in June, slightly more than May's 20 percent. June saw a similar story for coal production as well, which rose by 7.4 percent after the 6.9 percent rise in May.

Interestingly, electricity output rose by 7.2 percent in June, after rising by 7.5 percent in May and 38.5 percent in April. It had risen a substantial 21.2 percent in March as well. Electricity production is generally tied to coal output given the large share of coal fired thermal manufacturing in India's electricity generation grid.

Finally, the fertiliser sector, which had beaten the contraction pangs even in the peak of lockdown but had fallen into contraction in May, again came back to the growth charts with a 2 percent rise in June.

The core sector data is released about two weeks before the IIP figures, pertaining to overall industrial output are put out. IIP figures for May will be announced on August 12.
Subhayan Chakraborty has been regularly reporting on international trade, foreign policy, and evolving industry and government issues for the past 6 years.
first published: Jul 30, 2021 05:33 pm
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