August core sector growth at 9-month high

Written by fe Bureau | New Delhi | Updated: Oct 1 2013, 18:49pm hrs
On a day when the current account deficit widened to 4.9% of the GDP for the first quarter ended June, official data showed the core sectors grew at a nine-month high of 3.7% in August.

Electricity production grew 6.7% while refinery production was up 4.9%. Coal output grew 5.5% in August, a nine-month high. Cement production showed a pickup at 5.5% after three months.

This bore out the government's claim that removal of certain policy hurdles in infrastructure sectors such as coal and electricity and fast-tracking of projects have given some momentum to these industries.

Analysts, however, cautioned that the pick-up in August was mild and not a clear indicator of a sustained recovery. The core sectors grew 6.1% in August last year and 3.1% last month. The growth was witnessed on the back of an increase in the output of coal, cement and electricity.

The combined index of the core sector stood at 154.5 in the month.

This is a reasonably good performance compared with previous months due to growth in exports in July and August. However, this is a mild pickup continuing from the last month and does not show a major recovery. A major recovery will be affected by structural problems, said Mathew Joseph of the Delhi-based Fore School of Management.

The eight core industries of coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity- have a combined weight of 37.9% in the Index of Industrial Production (IIP). The growth in the core industries will reflect in the IIP numbers of August, which will be released next month.

These numbers will provide some support to IIP which we expect will be in the positive territory,. However, the other components of IIP including automobile and durables are not doing well. Our projections for the overall industrial growth for the full year stand at 1%, added D K Joshi, chief economist, Crisil.

Fertiliser output was up 1.7% whereas natural gas declined as steeply as 16.1% in August and has been declining for more than a year now. Crude oil output declined 1.5% in the month and has been falling for the last five months.