Eight – Core Sector

Source: TH

Context: Output levels in India’s core sectors slipped to a nine-month low in August, even as year-on-year growth slipped 1.8%, marking the first contraction in three and a half years.

Trends in India’s Core Sector Output (August 2024):

• Overall Contraction: Core sector output declined by 1.8% in August 2024, compared to the 6.1% growth recorded in July.

• Negative Growth in Key Industries: Coal: Down by 8.1%, marking the steepest decline. Electricity: Decreased by 5%, the first contraction in 13 months. Cement: Registered a 3% decline, its worst performance in nine months. Refinery Products: Dropped by 1%, marking the second fall in three months. Natural Gas: Fell by 3.6%, its second successive month of contraction. Crude Oil: Declined by 3.4%, continuing its third straight month of negative growth.

• Coal: Down by 8.1%, marking the steepest decline.

• Electricity: Decreased by 5%, the first contraction in 13 months.

• Cement: Registered a 3% decline, its worst performance in nine months.

• Refinery Products: Dropped by 1%, marking the second fall in three months.

• Natural Gas: Fell by 3.6%, its second successive month of contraction.

• Crude Oil: Declined by 3.4%, continuing its third straight month of negative growth.

• Modest Growth in Fertilizers and Steel: Fertilizers: Grew by 3.2%. Steel: Registered a 4.5% increase, though this was its slowest growth in 26 months.

• Fertilizers: Grew by 3.2%.

• Steel: Registered a 4.5% increase, though this was its slowest growth in 26 months.

Reasons for the decline:

• Base effect: The sharp contraction in August can be partly attributed to the high base of 13.4% growth from the previous year, making the current year’s figures appear lower by comparison.

• Monsoon impact: The late withdrawal of the monsoon has disrupted coal production and electricity generation, affecting overall industrial activities.

• Global economic uncertainty: Ongoing global economic challenges have impacted demand, particularly for energy-intensive industries like electricity and coal.

• Supply chain disruptions: Factors such as logistical bottlenecks and fluctuations in international markets for crude oil and natural gas have affected the output of refinery products and crude oil.

• Seasonal factors: Reduced construction activity during the monsoon months likely contributed to lower output in the cement and steel sectors.

Background:

• Index released by: The Index of Eight Core Industries (ICI) is released by the Office of the Economic Adviser under the Department for Promotion of Industry and Internal Trade (DPIIT) in the Ministry of Commerce & Industry.

• Base year: The base year for the ICI is 2011-12.

• Frequency: The ICI is published every month.

• Significance: It serves as a critical barometer of India’s industrial performance, covering 40% of the weight in the Index of Industrial Production (IIP).

Insta links:

• 8 – core sectors