India’s core sector output grew at the fastest pace in four months at 5.8% in February, compared with a 4% growth in January, with six of eight sectors registering growth. Crude oil and fertiliser production fell 2.2% and 1.4% year-on-year, respectively.
Economists attributed February’s numbers largely to the base effect, as February 2021 had recorded a 3.3% contraction in core sector production. In fact, the overall index of eight core industries released on Thursday fell 5.3% compared with January 2022, with all sectors witnessing a month-on-month dip.
Cement, for instance, grew 5% compared with February 2021, but output was 4.4% lower than in January 2022. Similarly, refinery products’ output was up 8.8%, but 7.3% lower than the preceding month.
Steel production grew for the second month in a row after contracting in December, rising 5.7% in February. Electricity generation grew 4%, while natural gas and coal output grew 12.5% and 6.6%, respectively.
The continued contraction in crude oil and fertilisers, and sharp moderation in cement output growth cast a sobering note, said ICRA chief economist Aditi Nayar, who estimates the index of industrial production (IIP) to rise less than 2.5% in February. The core sectors account for about 40% of the IIP.
Economists at India Ratings and Research Sunil K. Sinha and Paras Jasrai noted that the 5.8% growth in core sectors had been attained on a low base from last February, while crude oil, refinery and fertiliser production is still below pre-pandemic levels.
“Production of other core segments are also just above the pre-COVID level. This shows that there is still a long way to go so far as revival of core sectors’ output is concerned and the disruption to global supply chains may further impinge on the availability of key raw materials like natural gas and coal in the domestic market due to the Russia-Ukraine conflict,” they said.