India’s core sector output growth contracts by 1.8% in August

New Delhi: India's core sector output, which accounts for about two-fifths of industrial production, fell during August, with six of the eight core sectors reporting negative growth during the month.

The index of eight core industries fell by 1.8% annually in August compared with a 6.1% increase in July, according to provisional data released by the commerce ministry on Monday.

A year ago, the output of the eight core industries—coal, crude oil, steel, cement, electricity, fertilisers, refinery products, and natural gas—had expanded 13.4% year-on-year. The provisional data for August could be revised in October.

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The slowdown in manufacturing could significantly affect industrial production in August, data for which will be released in October.

Performance by industry

Only two of the eight sectors — fertilisers and steel — reported a sequential rise in production in August. The output of coal, crude oil, natural gas, refinery products, cement and electricity all contracted, according to the latest data.

• Coal production fell by 8.1% in August, compared to an increase of 6.8% in July.
• Crude oil production contracted by 3.4% against a 2.9% fall the previous month.
• Natural gas production fell by 3.6% in August versus a 1.3% fall in July.
• Refinery products output fell by 1% against 6.6% growth reported in July.
• Cement production fell 3% compared with a 5.5% increase in July.
• Electricity production fell 5%, after increasing 7.9% the previous month.
• Fertiliser output grew 3.2% in August, compared to 5.3% growth the previous month.
• Steel production grew 4.5%, against 6.4% growth in July.

Base effect skewed numbers, experts say

The performance of the eight core sectors in August was skewed by the effect of a high base owing to rapid growth last year, experts said.

"Coal (output) was down from 17.9% to -8.1% and electricity from 15.3% to -5% (during August). This does not reflect the traction seen in the business sectors and power consumption. While the monsoon subsided this month, the rise in temperatures increased the demand for power," said Madan Sabnavis, chief economist atBank of Baroda.

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"Steel and cement saw growth of 4.5% and -3%, respectively as the growth last year was high at 16.4% and 19.7%. Clearly, the base effect brought down the numbers but this is not expected to continue as infrastructure-related activities have picked up since the general elections," he said. Higher imports partly accounted for the slowdown in domestic production of oil, he added.

Incidentally, India’s manufacturing activity fell to a three-month low in August amid a moderate increase in new business and production, according to the HSBC India Manufacturing Purchasing Managers Index (PMI) released in early September. Manufacturing 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 57.5 in August, down from 58.1 in July, 58.3 in June, 57.5 in May, and 58.8 in April.

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