Core sector growth slows to 5.2% in March

The growth of “core sectors” eased to 5.2% in March from 7.1% in February on account of the statistical effect of a high base, data released by the commerce ministry showed on Tuesday. Sequentially, however, the output of eight core industries rose 9.9% in March, at the highest rate in 12 months.

Typically, core sector’s output rises in March from February, but the sequential growth recorded between the two months in FY24, is lesser than the 11.4% growth recorded on average in the past 12 years.

For the entire fiscal year 2023-24 the core sector’s output grew at a three-year low of 7.5%, as against 7.8% growth recorded in 2022-23.

On a year-on-year basis, the growth of five sectors – coal, crude oil, natural gas, refinery products, and steel – slowed in March from the levels in February; while the growth of fertilisers, cement and electricity increased.

The production of refinery products, carrying a weight of 28% in the core sector index, contracted 0.3% year-on-year in March. In February, the output had grown 2.6%.

The growth in production of natural gas and crude oil eased to 2% and 6.3%, respectively, in March from 7.9% and 11.3%, in February.

“The energy basket of crude, gas and refinery products showed different tendencies. Natural gas was up by 6.3% while that of refinery products was down marginally due to lower growth in exports,” said Madan Sabnavis, chief economist, Bank of Baroda. In March, petroleum products exports had fallen 13.7% on year.

Coal and cement production grew at 8.7% and 10.6%, respectively, year-on-year, in March. In February, the two sectors had recorded a growth rate of 11.6% and 9.1%, respectively. Economists say the sharp growth in coal and cement output is a consequence of rise in industrial activity, high demand for electricity, as well as infrastructure push from the government.

ICRA Chief Economist Aditi Nayar said: “Similar to the trend displayed by the core sector, IIP growth is likely to moderate somewhat in March, as the leap year effect fades. We project the IIP growth at 3.5-5% in March.”