India’s core sector output grew at the fastest pace in four months, at 5.8% in February, compared with a growth of 4% in January, with six of the eight sectors registering growth. Crude oil and fertilizer production declined by 2.2% and 1.4%, respectively, on a year-on-year basis.
Economists attributed the February numbers mainly to the base effect, as core sector output recorded a contraction of 3.3% in February 2021. In fact, the composite index of eight core industries released on Thursday fell 5.3% compared to January 2022, with all sectors witnessing month-on-month declines.
For example, cement grew 5% compared to February 2021, but production was 4.4% lower than in January 2022. Similarly, production of refinery products was up 8.8%, but down 7.3% from the previous month.
Steel production rose for the second straight month after contraction in December, up 5.7% in February. Electricity generation increased by 4%, while natural gas and coal production increased by 12.5% and 6.6%, respectively.
The sustained contraction in crude oil and fertilizers and a sharp fall in cement production put a grim note, said Aditi Nair, chief economist at ICRA, which forecasts the Index of Industrial Production (IIP) to grow at less than 2.5% in February. The core sector’s share in IIP is around 40 per cent.
India Ratings and Research economists Sunil K Sinha and Paras Jasrai said core sector growth of 5.8% since last February has been on a low base, while crude oil, refinery and fertilizer production is still below pre-pandemic levels.
“The production of other core segments is also well above pre-COVID levels. This shows that there is still a long way to go as far as revival of production in core sectors is concerned and on the availability of key raw materials like natural gas and coal in the domestic market due to disruption in global supply chains. There may be more impact. Russia-Ukraine conflict,” he said.