The growth of eight core industries rose to 6.2% in April from 6% in March, mainly due to higher growth achieved in natural gas, refinery products, coal, steel and electricity sectors, data released by the commerce ministry showed on Friday. The April print was also aided by the statistical effect of a low base. In April 2023, the core sector had grown 4.6%. On a sequential basis, however, the core sector’s output fell 8.1%, at the steepest pace in 12 months. Typically, April witnesses a contraction in production as compared to March. In the past 12 years, the output has contracted 12.1% on an average between the two months.
Madan Sabnavis, chief economist, Bank of Baroda, said: “This is a single month growth rate which has been driven quite decisively by base effects for several components of the index.” Sabnavis added that April has been the time when there has been less focus on spending by the government given the ongoing elections, hence the numbers must be read with “caution”. Coal and natural gas grew 7.5% and 8.5%, respectively, in April. The 7.1% growth in steel output indicates continued investment in construction activity, mainly supported by the government capex, said economists at India Ratings and Research (Ind-Ra). The capex of the union and 16 state governments grew at a strong 25.3% to `1.12 trillion in April.
In addition, the output of the electricity sector also firmed up to a six-month high of 9.4% in April due to rising power demand in the backdrop of scorching heat. Although the core sector in April 2024 was 19.8% higher than the pre-Covid level (February 2020), the trend was not uniform across all the sectors, pointed Ind-Ra. The output of coal, crude oil, refinery products were up by just 1.3%, 0.9% and 7.0% than the pre-Covid level, respectively suggesting the long catch up they have to do for sustained broad-based recovery.
Economists say that the pickup in the core sector in April will provide support to the overall industrial output, and thus expect IIP to grow at around 5% during the month. For May, they expect the core sector growth to come in around 6-7%.