Base effect, higher refinery production accelerates June core factory output

Favourable base effect, along with higher production of refinery products and steel accelerated India's eight major industries' output in June 2018, official data showed on Tuesday.

According to the Ministry of Commerce & Industry, the Index of Eight Core Industries (ECI) rose by 6.7 per cent during the month under review was higher than the rise of 4.3 per cent in May and just 1 per cent in June 2017.

"The combined Index of Eight Core Industries stands at 129.8 in June, 2018, which was 6.7 per cent higher as compared to the index of June, 2017," the ministry said in a statement.

"Its cumulative growth during April to June, 2018-19 was 5.2 per cent."

The ECI index represents major sectors like coal, steel, cement and electricity. It carries 40.27 per cent weightage of the Index of Industrial Production (IIP), which is the macro gauge for India's factory output.

On a sector-specific basis, refinery products, which has the highest weightage of 28.03 per cent, grew by 12 per cent in June 2018 compared with the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85, picked up by 4 per cent.

Steel production, the third most important component with weightage of 17.92, inched up by 4.4 per cent during the month under review, whereas coal mining, with a 10.33 weightage, edged higher by 11.5 per cent.

On the other hand, extraction of crude oil, which has an 8.98 weightage, declined by (-)3.4 per cent during the month under consideration.

The sub-index for natural gas output, with a weightage of 6.88, slipped by (-)2.7 per cent.

Cement production, which has a weightage of 5.37, edged higher by 13.2 per cent in June 2018.

Fertiliser manufacturing, which has the least weightage -- only 2.63 -- inched-up by 1 per cent during the month under review.

"A healthy pickup in the pace of growth of refinery products and steel, as well as a favourable base effect, contributed to the sequential improvement in core sector expansion to a seven month high 6.7 per cent in June 2018," said Aditi Nayar, Principal economist at ICRA.

"Disaggregated data continued to provide mixed signals. While coal, cement and refinery products recorded double-digit growth, the sharp slowdown in growth of fertilizers and the deepening contraction in crude oil and natural gas in June 2018 relative to the previous month, were disappointing."

--IANS

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