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India’s Core Sector Records 8.2% Growth in June, Highest in Five Months

India’s eight core infrastructure sectors have shown a notable growth rate of 8.2% in June, marking the highest in five months, according to the Ministry of Commerce and Industry’s latest data released on July 31. These core sectors, including coal, crude oil, steel, cement, electricity, fertilizers, refinery products, and natural gas, play a crucial role in the country’s industrial production.

Overall Growth Trend:

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India’s Core Sector Records 8.2% Growth in June, Highest in Five Months
  • The core sector growth for May has been revised upwards to 5.0% from the initial 4.3%.
  • In comparison to June 2022, which recorded a growth rate of 13.1%, the current growth is lower due to a favorable base effect.
  • However, the cumulative core sector growth for the first quarter (April-June) of 2022-23 stands at 5.8%, which has declined from the robust 13.9% recorded in the preceding three months.

Sector-Wise Performance:

Steel Sector:

    • Steel sector demonstrated remarkable growth, with output jumping by 21.9% in June, twice the growth rate recorded in May (10.9%).

Electricity Sector:

    • Electricity production showed substantial improvement, growing by 3.3% in June compared to a mere 0.8% in May.

Coal Sector:

    • Coal output increased by 9.8% in June, contributing significantly to the overall sector growth.

Cement Sector:

    • Cement production maintained a robust growth rate of 9.4% in June, though slightly lower than the previous month’s growth of 10.9%.

Fertilizer Sector:

    • Fertilizer output witnessed a slowdown, growing at 3.4% in June, down from 9.7% in May.

Crude Oil Sector:

    • Crude oil output contracted again in June, declining by 0.6%, compared to a 1.9% fall in May.

Factors Impacting Performance:

  • Aditi Nayar, chief economist at ICRA, attributed the improved performance in June to factors such as the tardy onset of the monsoon, contributing to increased output growth in sectors like electricity and coal.

Prospects for Industrial Growth:

  • The core industries account for over 40% of the Index of Industrial Production, making them significant contributors to overall industrial growth.
  • Nayar predicts that industrial growth for June could be in the range of 4-6% despite the moderation in year-on-year performance in several high-frequency indicators.
  • Industrial output had grown by 5.2% in May, and the data for June is set to be released on August 11.

Index of Industrial Production (IIP):

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India’s Core Sector Records 8.2% Growth in June, Highest in Five Months
  • IIP is an indicator that measures changes in the volume of production of industrial products during a specific period.
  • It is compiled and published monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
  • IIP is a composite indicator that measures the growth rate of industry groups categorized under broad sectors (Mining, Manufacturing, and Electricity) and use-based sectors (Basic Goods, Capital Goods, and Intermediate Goods).
  • The base year for IIP is 2011-2012.

Significance of IIP:

  • Government agencies, including the Ministry of Finance and the Reserve Bank of India, use IIP for policy-making purposes.
  • IIP is crucial for calculating quarterly and advance GDP (Gross Domestic Product) estimates.

Eight Core Sectors:

  • The eight core sectors comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
  • The core sectors, ranked by their weightage, are:
    1. Refinery Products
    2. Electricity
    3. Steel
    4. Coal
    5. Crude Oil
    6. Natural Gas
    7. Cement
    8. Fertilizers

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