India’s core sector growth picks up in July

New Delhi: India's core sector output, which accounts for about two-fifths of industrial production, picked up in July, aided by improved pace of business activity and road projects.

The index of eight core industries rose 6.1% annually in July compared with a 5.1% growth in June, showed the provisional data released by the Ministry of Commerce and Industry on Friday.

A year ago, the output of the eight core industries—coal, crude oil, steel, cement, electricity, fertilisers, refinery products, and natural gas—had expanded 8.5% year-on-year.

The provisional data for July could be revised in the coming month.

Industry performance

Only four — cement, steel, fertilisers, refinery products — of the eight core industries reported a sequential rise in production in July, while output in crude oil, and natural gas contracted, according to the latest data.

Cement production grew 5.5% compared with a 1.9% growth in June; steel production grew 7.2% versus a 6.7% contraction in the previous month; fertilisers output rose 5.3% against a 2.4% in June; while refinery products output grew 6.6% against a 1.5% contraction in the previous month.

The output in refinery products accounts for over 28% of the index of the eight core industries.

Meanwhile, electricity output expanded 7% in July against 8.6% in the previous month; and coal grew 6.8% versus 14.8% growth in June.

Crude oil and natural gas production contracted 2.9% and 1.3%, respectively, in July, compared with a 2.6% contraction in crude oil production and 3.3% growth in natural gas output in June.

Expert Take

According to experts, the rise in electricity and coal production in July indicated heightened business activity as the month had good rains amid a minimal ‘heatwave’ effect.

"Post elections, there has been a pick-up in road construction in particular. The good performance of housing and auto also added to the demand for steel," said Madan Sabnavis, chief economist at the Bank of Baroda.

"Fertiliser growth was higher at 5.3%, and it does appear that companies are building stocks for both kharif and rabi. This will be hopefully sustained," he added.

Incidentally, India’s manufacturing activity fell slightly in July amid softer increases in new orders and output, according to the HSBC India Manufacturing Purchasing Managers Index (PMI) released in early August.

Manufacturing activity had recovered in June after hitting a three-month low in May.

The HSBC final India Manufacturing Purchasing Managers Index (PMI), compiled by S&P Global, stood at 58.1 in July after clocking 58.3 in June, 57.5 in May, and 58.8 in April.