India’s 8 core industries’ June production up 8.9% (Ld)

Low base effect, along with easing of Covid 2.0 restrictions, boosted the output of India’s eight major industries in June on a year-on-year basis.

The Index of Eight Core Industries (ICI) readings for the last month showed an expansion of 8.9 per cent from a decline of 12.4 per cent in output during the same month of the previous year.

Last year, the pandemic-triggered national lockdown during Q1FY21 had a massive impact on the economy. It was only on June 1, 2020 that the partial unlock measures were implemented.

Unlike last year, the lockdown in 2021 was more regional in nature, and production and manufacturing by several industries were allowed this time around.

“The combined ICI stood at 126.6 in June 2021, increasing by 8.9 per cent (provisional) as compared to the Index of June 2020,” the Ministry of Commerce & Industry said in a statement.

“The production of coal, natural gas, refinery products, fertilisers, steel, cement and electricity industries increased in June 2021 over the corresponding period of last year,” it added.

Besides, the ministry revised the final growth rate of ICI for March 2021 to 12.6 per cent from its provisional level of 6.8 per cent.

“The growth rate of ICI during April-June 2021-22 was 25.3 per cent as compared to the corresponding period of last FY,” the statement said.

The ICI index comprises 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

These industries comprise coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.

On a sector-specific basis, the output of coal, which has a weightage of 10.33 per cent in the index, showed a growth of 7.4 per cent in June 2021 over the same month of the previous year.

Similarly, the output of refinery products, which has the highest weightage of 28.04 per cent, rose by 2.4 per cent, compared to the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85 per cent, rose by 7.2 per cent, whereas steel production was up 25 per cent last month.

However, the extraction of crude oil, which has an weightage of 8.98 per cent, declined by 1.8 per cent during the month under consideration, though the sub-index for natural gas output, with a weightage of 6.88 per cent, rose by 20.6 per cent.

Cement production, which has a weightage of 5.37 per cent, rose by 4.3 per cent in the month under review.

Fertiliser manufacturing, which has the least weightage — only 2.63 per cent — grew by 2 per cent.

“As expected, the waning of the favourable base effect outweighed the impact of the lifting of state restrictions, causing the core sector growth to halve to 8.9 per cent in June 2021 from 16.3 per cent in May 2021,” said Aditi Nayar, Chief Economist, ICRA.

“Despite the gradual unlocking, the sequential uptick in the overall core index in June 2021 was mild at just 1.1 per cent, with double-digit increases in cement and fertilisers, dampened by an MoM decline in petroleum refinery products and coal, with the latter reflecting the onset of the monsoon,” Nayar added.

According to Sunil Kumar Sinha, Principal Economist, India Ratings & Research: “The encouraging feature of the June 2021 data is that the production levels of five core sector segments namely crude oil, natural gas, fertiliser, steel and electricity are now higher than the production level of pre-Covid level (February 2020).

“In May 2021, the production levels of only three core sector segments — crude oil, natural gas and electricity — were higher than the production level of the pre-Covid level. In fact, the production level of all the eight core sectors had surpassed the pre-Covid levels in March 2021, but due to Covid 2.0 and related lockdowns, production activities were impacted in different parts of the country.”