NEW DELHI: Defying the negative sentiments and global headwinds, India’s core sectors displayed strong performance in August. The core sector -- consisting of eight key infrastructure sectors -- saw a growth of 12.1% in August, which is the highest in 14 months, the government data revealed. This growth was primarily driven by a low base effect and double-digit growth in five of the sectors. In comparison, the core sector had grown by only 4.2% in August last year. The July 2023 data was revised slightly upwards to 8.4% from the earlier estimate of 8%, according to the government.
While the growth in fertilizers and steel slowed down, coal, natural gas, refinery products, cement, and electricity recorded significant growth in August. Five of the core sector industries namely coal (17.9%, 14-month high), natural gas (10.0%, 18-month high), steel (10.9%), cement (18.9%, nine-month high), electricity (14.9%, 14-month high) registered double-digit y-o-y growth in August 2023. In addition, output of refinery products was also up 9.5% in August 2023, a 14-month high. However, crude oil production remained stable at 2.1% growth. Analysts attributed the strong growth in the core sector to the dry spell of monsoon as well as high capex spending by the government.
“The solid growth in cement and electricity sectors also got support from the dry spell of monsoon in August 2023 (monsoon was 36.2% below normal at the all-India level). The output in these sectors is impacted by monsoon rainfall which puts a break on construction activity and reduces the demand for power. The buoyant growth in cement and steel sectors is getting sustained support from government capex,” said Sunil Kumar Sinha and Paras Jasrai of India Ratings and Research.
The eight core industries have a significant impact on the Index of Industrial Production (IIP), accounting for 40.27% of its weighting. “Given the uptick in the core sector growth, as well as healthy performance of high frequency indicators such as auto output, GST e-way bills, rail freight etc., we forecast the IIP to expand by 9-11% in the month of August 2023,” Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd, said.