13-month high growth in core sector indicates industrial revival


Modi Government assiduous effort brought the core sector growth 13-month high of 6.8% in November. Economists see the 13-month high of the growth as an overall industrial revival from November onwards. The core sector comprises electricity , steel, refinery products, crude oil, coal, cement, natural gas and fertilisers. It contributes almost 40% of economic growth. The combined Index of Eight Core Industries stands at 123.9 in November, 2017, which was 6.8 per cent higher as compared to the index of November, 2016. Its cumulative growth during April to November, 2017-18 was 3.9 per cent. The Union government`s visionary and its commitment to employment oriented growth has brought country’s iron and steel exports more than double their import. Steel production (weight: 17.92 per cent) increased by 16.6 per cent in November, 2017 over November, 2016.

Its cumulative index increased by 7.2 per cent during April to November, 2017-18 over the corresponding period of previous year. A year earlier, in March 2016, India’s iron and steel imports were about three times their exports and local steelmakers were pleading with the government for protection. Business newspaper mint writes in its analysis “While a lot of the credit for it is rightly given to the government’s decision to protect the domestic industry by imposing a minimum import price (MIP), anti-dumping duty, etc. on steel imports, an important factor was also the fact that Chinese steel exports had started plunging. Data sourced from the International Trade Centre (ITC) reveals that starting January 2017, Chinese steel exports have been dropping by at least 25% year-on-year every month.”

Coal production (weight: 10.33 per cent) declined by 0.2 per cent in November, 2017 over November, 2016. Its cumulative index increased by 1.5 per cent during April to November, 2017-18 over corresponding period of the previous year.

Crude Oil production (weight: 8.98 per cent) increased by 0.2 per cent in November, 2017 over November, 2016. Its cumulative index declined by 0.2 per cent during April to November, 2017-18 over the corresponding period of previous year.

The Natural Gas production (weight: 6.88 per cent) increased by 2.4 per cent in November, 2017 over November, 2016. Its cumulative index increased by 4.4 per cent during April to November, 2017-18 over the corresponding period of previous year.

Petroleum Refinery production (weight: 28.04 per cent) increased by 8.2 per cent in November, 2017 over November, 2016. Its cumulative index increased by 3.6 per cent during April to November, 2017-18 over the corresponding period of previous year.
Fertilizer production (weight: 2.63 per cent) increased by 0.3 per cent in November, 2017 over November, 2016. Its cumulative index declined by 1.1 per cent during April to November, 2017-18 over the corresponding period of previous year.

Cement production (weight: 5.37 per cent) increased by 17.3 per cent in November, 2017 over November, 2016. Its cumulative index increased by 0.6 per cent during April to November, 2017-18 over the corresponding period of previous year.
Electricity generation (weight: 19.85 per cent) increased by 1.9 per cent in November, 2017 over November, 2016. Its cumulative index increased by 4.9 per cent during April to November, 2017-18 over the corresponding period of previous year.

Business line commenting on core sector growth wrote that the impact of the roll out of the Goods and Services Tax and demonetisation may finally be wearing off, with the index of eight core industries expanding at its fastest pace so far this fiscal.

“Things appear to be looking up. The good performance in these two sectors is primarily due to demand in the auto and capital goods segments and pick up in the construction sector following higher spending by the government.”
—Madan Sabnavis,
Chief Economist, CARE Ratings

“We expect growth of the Index of Industrial Production (IIP) to rebound to a healthy five-six per cent in November. The favourable base effect related to the temporary slowdown in activity after demonetisation is likely to boost volume growth in a variety of sectors in the remainder of FY18.”
—Aditi Nayar, Principal Economist at rating agency ICRA.