The output of India’s core sector, consisting of eight infrastructure industries, grew at a slower pace of 3.5% in April compared to 3.6% in March, according to data released by the National Statistical Office (NSO) on May 31.
This marks the slowest growth in the past six months. Nevertheless, the core sector industries play a significant role in the Index of Industrial Production (IIP), accounting for 40.27% of its composition.
The data for April’s IIP will be released on June 12.
The slowdown in Multiple Sectors Contributes to Slower Growth
Compared to March, contracts primarily drove the moderation in core sector output in four of the eight sectors.
The electricity, refined products, natural gas, and crude oil sectors experienced declining production.
Electricity Production Declines for Second Consecutive Month
Electricity production, which holds a 19.9% share in the core sector, decreased by 1.4% in April, following a 1.6% decline in March.
This decline may be attributed to lower power demand due to the cooler weather experienced in April.
Production of Refined Products and Natural Gas Contracts
Refined products, with a 28% share in the core sector, contracted by 1.5% in April, compared to 1.5% growth in March.
Similarly, natural gas production, accounting for a 6.9% share, decreased by 2.7% in April after experiencing 2.8% growth in March.
Crude Oil Production Also Witnesses Contraction
The production of crude oil, representing a 9% share, fell by 3.5% in April, following a 2.9% contraction in March.
However, the other four sectors—steel (17.9% share), fertilizers (2.6%), cement (5.4%), and coal (10.3%)—experienced growth in April.
Except for coal, these sectors displayed an acceleration in growth compared to March.
Expert Outlook and Projections
Dr. Sunil Sinha, principal economist at India Ratings and Research, noted that the steel and cement sectors continue to exhibit robust year-on-year growth, supported by capital expenditure by the central and state governments.
In April 2023, the capital outlay of both the union and state governments saw significant growth, with union government spending rising by 12.1% year-on-year and state governments (13 states, representing over 50% of all states’ capital expenditure) increasing by 65.0% year-on-year.
As a result, Dr. Sinha expects the core sector to record year-on-year growth of around 4-5% in May 2023.
| Sector | April Growth (%) | March Growth (%) |
|---|---|---|
| Electricity | -1.4 | -1.6 |
| Refined Products | -1.5 | 1.5 |
| Natural Gas | 2.7 | 2.8 |
| Crude Oil | -3.5 | -2.9 |
| Steel | X | X |
| Fertilizers | X | X |
| Cement | X | X |
| Coal | X | X |
Conclusion
The core sector output in India grew at a slower pace of 3.5% in April, compared to the previous month, due to contractions in electricity, refined products, natural gas, and crude oil sectors.
However, sectors such as steel, fertilizers, cement, and coal demonstrated growth driven by government capital expenditure.
As a result, experts project a moderate year-on-year growth rate for the core sector in May 2023.
The upcoming Index of Industrial Production data release will provide further insights into India’s industrial performance.
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