India's core sector growth rises 4.7% in March, most in five months

Annual growth remains unchanged in FY19 at 4.3%

The core sector of the economy recorded 4.7 per cent growth in March, the highest in five months, with impressive recoveries in the refinery products segment. Cement production, too, improved rapidly last month.   

With this, the annual core sector growth for FY19 was 4.3 per cent, the same as the previous year. 

Data released by the Ministry of  Commerce and Industry on Tuesday showed that the eight segments — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — witnessed growth recoveries in March after weakening for four-straight months. In February, the core sector growth stood at 2.2 per cent. 

Refinery products, which command almost 30 per cent of the core sector index, rose by 4.3 per cent in March, breaking a contractionary spell that had gripped the sector since December 2018. 

Elsewhere in the energy space, lower crude oil prices continued to impact oil production as well as exports of refinery product. Crude oil production went down by 6.2 per cent, the highest margin of contraction in FY19. The sector has seen a contraction every month over the past year. However, natural gas production continued to grow, albeit at a slower pace. In March, the natural gas output rose by 1.4 per cent as against 3.8 per cent in the previous month. 

However, contributing almost 40 per cent to the country's total industrial production, the output of the core sectors continued to be dragged down by low growth in the crucial sector of electricity, which was up 1.4 per cent in March, marginally better than 1.2 per cent in February. 

Having the second-largest weightage in the core sector index, growth in the electricity sector had decelerated to 0.8 per cent in January, the slowest in 71 months. Economists had blamed poor growth in coal output for this.

"The core segments that have performed erratically on the monthly basis and poorly on the annual basis in FY19 are crude oil, natural gas and fertiliser. The performance of the electricity segment has also been moderate in FY19. In fact, plagued by NPAs, electricity growth has remained subdued since FY15," said Sunil Kumar Sinha, director, Public Finance, and principal economist at India Ratings. 

However, the coal output has disproportionately risen since January when growth was just 1.7 per cent. The coal production rose by 9.1 per cent in March, up from 7.4 per cent in February. 

In the infrastructure space, steel output growth 6.7 per cent in March -- the highest in three months -- up from 4.9 per cent in the preceding month. On the other hand, cement production jumped to an 11-month high of 15.7 per cent in March. 

Finally, fertiliser production growth gained pace in March, rising 4.3 per cent, up from 2.5 per cent in February. Growth in the sector had bounced back in January, registering a 10.5 per cent rise, after three successive months of fall. Higher fertiliser output growth has come over a negative base effect last year. This can be attributed to restocking to an extent as the main demand season for sowing is completed, economists said.