Core sector growth surges to 15 month high of 5.7% in February

The core sectors in the country once again locked themselves into a faster growth trajectory, rising to 15 month high of 5.7 per cent in the month of February, on the back of a strong showing by fertiliser, cement, electricity and refinery products. The eight industries - crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel having weightage of 38% in the overall Index of Industrial Production (IIP) rose to 5.7 per cent in February compared with 2.9% in the previous month. It is the highest growth since November 2014, when these sectors had witnessed a growth of 6.7 per cent. 

According to data released by the ministry of commerce and industry, the combined Index of Eight Core Industries stands at 172.2 in February, 2016, which was 5.7 %higher compared to the index of February, 2015. Its cumulative growth during April to February, 2015-16 was 2.3 %. Seven out of eight sectors that make up the core index reported positive growth in February. Only steel sector posted negative output growth in February.

Among the eight sectors, fertilizer and cement expanded by double-digits. Fertilizer production having weightage of 1.25% increased by 16.3% in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 10.3% over the corresponding period of previous year. Cement production having weight 2.41% rose for a third straight month by 13.5% in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 3.9% over the corresponding period of previous year. The low base of the previous year-- a contraction of 0.4 per cent in fertiliser and growth of 2.2 per cent in cement-- pushed up the numbers this February.

Electricity generation, having 10.32% weight touched a five-month high of 9.2 per cent in February, led by a double-digit growth of thermal electricity generation of 12 per cent, the impact of which was dampened by an 11 per cent contraction in hydroelectricity generation. Its cumulative index during April to February, 2015-16 increased by 4.6% over the corresponding period of previous year. Coal production having 4.38% weight increased by 3.9% in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 5.0% over corresponding period of previous year. Crude Oil production having weight 5.22% increased by 0.8% in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 decreased by 1.0% over the corresponding period of previous year. Natural Gas production having weight 1.71% increased by 1.2 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 declined by 3.6% over the corresponding period of previous year. Petroleum Refinery production having weight of 5.94% increased by 8.1% in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 3.1 % over the corresponding period of previous year.

Despite the improvement, steel remained the only core to record a contraction in February, thanks to poor demand from end-users as well as availability of cheaper imports. The imposition of minimum import price for steel imports helped to restrict the contraction to just 0.5 per cent in February 2016 from an average of 5% in the previous three months.

The broad-based improvement in core-sector growth in February will likely support the IIP estimate for the month, although the performance of the IIP in February could remain weak due to an unfavorable base.