India’s core sector production up 3.2% in August

The Dollar Business Bureau 

India’s core sector production grew 3.2% last month due to a sharp increase in steel production and a slight growth in cement, giving an indication that the country’s infrastructure and construction activity has picked up last month.

Steel production registered a 37-month high last month as it grew by 17% over the corresponding period of last year.  Cement output too rose 3.1% compared to a 1.4% rise in July. The core sector growth was earlier revised down to 3% from its estimated 3.2%.

The index performance of eight core infrastructure sectors – steel, cement, coal, refining, natural gas, crude oil, fertilisers and electricity generation - has a 38% weight in the Index of Industrial Production (IIP). The latest data suggest an improvement over 2.4% contraction in July.

“With a minor uptick in core sector growth, a turnaround in the performance of non-oil merchandise exports, as well as the sharply higher expansion in auto production, the performance of the IIP in August 2016 may improve from the dismal contraction seen in July 2016,” said Aditi Nayar, vice president and senior economist, ICRA. 

The core sector growth for the April-August period stood at 4.5% as against 2.4% in the same period last fiscal. The previous quarter data will be an important deciding factor in the RBI’s rate cut decision in its upcoming monetary policy committee.

The three sectors that registered a fall in production were coal, crude oil and natural gas as their output fell by 9.2%, 3.9% and 5.7% respectively. Refinery output, too, grew 3.5% but remained lower than 13.7% in July. The biggest takeaway was the output of cement and steel sectors that suggested progress in India’s infrastructure sector.

Fertilizer output grew at 5.7% from a 4.3% decline in July. Electricity production registered a meagre growth at 0.1% due to a contraction in thermal power.