Core sector growth up 8.5% to touch 4-year high

The Dollar Business Bureau

The core industry growth has touched a four-year high, with the Index of Industrial Production (IIP) surging up 8.5% at 176.4 in April, 2016, when compared to the growth of 6.4% in the previous month of the same year. The cumulative growth of the index rose 2.7% during FY 2016 against 4.5% in the previous fiscal, Ministry of Commerce and Industry said in a statement.

The IIP comprises of eight core industries that include coal, cement, crude oil, electricity, fertilisers, natural gas, refinery products and steel. These eight sectors comprise around 38% of the country’s overall industrial production. According to the Ministry of Commerce data, the index for petroleum refinery products increased 17.9% in April this year over the same month last year.

While coal, crude oil and natural gas production decreased by 0.9%, 2.3%, and 6.8% respectively, the production of fertilisers, steel, cement and electricity increased by 7.8%, 6.1%, 4.4% and 14.7% respectively in April, 2016 against the same month a year ago.

Aditi Nayar, Senior Economist at ICRA Ltd said that the pickup in the growth of eight core industries is exciting. The petroleum refinery and electricity sectors record double-digit growth, after contraction in April last year. This is bringing the confidence on the sustainable growth of these sectors, she said.

Though cement production has increased 4.4% in April 2016 over the same month last year, its growth has been decreased when compared to the average of around 11% in the previous three months. This is slightly discouraging to its growth story, and may be the decline is due to the inventory management, said the rating agency.

Nayar said that the reduction in coal production was expected in April 2016 because of the pileup of inventories. Due to several measures introduced by the government to control steel imports, the steel sector has seen an encouraging growth.