India’s Core Sector Records 8.2% Growth in June, Highest in Five Months

India’s Core Sector Records 8.2% Growth in June, Highest in Five Months: According to the latest data issued by the Ministry of Commerce and Industry on July 31, India’s eight core infrastructure industries grew at an 8.2% annual rate in June, the highest in five months.Coal, crude oil, steel, cement, power, fertilisers, refinery products, and natural gas are key components of the country’s industrial production.

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Overall Growth Trend:

India’s Core Sector Records 8.2% Growth in June, Highest in Five Months.The core sector growth rate for May has been revised up to 5.0% from 4.3% before.

In comparison to June 2022, which recorded a growth rate of 13.1%, the current growth is lower due to a favorable base effect.

However, the total core sector growth for the first quarter (April-June) of 2022-23 is at 5.8%, down from 13.9% in the previous three months.

Sector-Wise Performance:

Steel Sector:

• The steel sector expanded by 21.9% in June, more than doubling the growth rate reported in May (10.9%).

Electricity Sector:

• Electricity production showed substantial improvement, growing by 3.3% in June compared to a mere 0.8% in May.

Coal Sector:

• Coal output increased by 9.8% in June, contributing significantly to the overall sector growth.

Cement Sector:

• Cement production increased by 9.4% in June, somewhat less than the previous month’s rate of 10.9%.

Fertilizer Sector:

• Fertilizer output witnessed a slowdown, growing at 3.4% in June, down from 9.7% in May.

Crude Oil Sector:

• Crude oil output contracted again in June, declining by 0.6%, compared to a 1.9% fall in May.

Factors Impacting Performance:

• Aditi Nayar, chief economist at ICRA, attributed the improved performance in June to factors such as the tardy onset of the monsoon, contributing to increased output growth in sectors like electricity and coal.

Prospects for Industrial Growth:

• The core industries account for over 40% of the Index of Industrial Production, making them significant contributors to overall industrial growth.
• Nayar predicts that industrial growth for June could be in the range of 4-6% despite the moderation in year-on-year performance in several high-frequency indicators.
• Industrial output increased by 5.2% in May, and data for June will be announced on August 11.

Index of Industrial Production (IIP):

India’s Core Sector Records 8.2% Growth in June, Highest in Five Months

• IIP is an indicator that measures changes in the volume of production of industrial products during a specific period.
• It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics, and Programme Implementation.
• IIP is a composite indicator that measures the growth rate of industry groups categorized under broad sectors (Mining, Manufacturing, and Electricity) and use-based sectors (Basic Goods, Capital Goods, and Intermediate Goods).
• The base year for IIP is 2011-2012.

Significance of IIP:

• IIP is used for policymaking by government agencies such as the Ministry of Finance and the Reserve Bank of India.
• IIP is crucial for calculating quarterly and advance GDP (Gross Domestic Product) estimates.

Eight Core Sectors:

The eight main sectors account for 40.27% of the items in the Index of Industrial Production (IIP).

• The core sectors, ranked by their weightage, are:
  • Refinery Products
  • Electricity
  • Steel
  • Coal
  • Crude Oil
  • Natural Gas
  • Cement
  • Fertilizers