India’s Core Sector Output Slips to Nine-Month Low in August 2024
Context
Recently, India’s core sector output recorded its first contraction in three and a half years. It shrinked by 1.8% year-on-year, marking a nine-month low for core sector output.
- The Index of Core Industries (ICI), which contributes 40% to the broader Index of Industrial Production (IIP), dropped to 155.8, a 4.2% fall from July, continuing a three-month trend of sequential decline.
Relevance:
GS-03 (Indian Economy)
Sector-wise Performance:
- Coal and electricity output: Coal production fell by 8.1% and electricity generation by 5%.
- Steel output grew by 4.5%, but this was the slowest pace in 26 months.
- Fertilizer production saw a 3.2% rise, while cement output dropped 3%, marking its worst performance in nine months.
- Refinery products saw a 1% decline, the second contraction in three months.
- Natural gas production fell by 3.6%, marking its second consecutive monthly decline.
- Crude oil output contracted for the third month in a row, with a 3.4% drop.
Analysis and Outlook:
- The slowdown in output has been attributed to the base effect of the 13.4% growth witnessed last year.
- The delayed withdrawal of the monsoon has also impacted the core sector performance in September.
- Moreover, the weak output in cement and steel indicates reduced construction activity in Q2 of 2024.
About Core sector in India:
- The core sector plays a key role in defining the overall health of the Indian economy.
- The sector comprises of eight key industries: coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity.
- The core sector industries creates a multiplier effect in the economy due to its interconnections with other sectors. Even a small change in the core sector will drastically impact the entire economy.
Index of Eight Core Industries (ICI):
- The ICI is released by the Office of the Economic Adviser (OEA), Department for Promotion of Industry and Internal Trade (DPIIT), and Ministry of Commerce & Industry.
- It is computed once in every month.
- The ICI comprises various components that collectively reflect the performance and vitality of India’s industrial sector. These components include: Coal, Electricity, Crude Oil, Cement, Natural Gas, Steel, Refinery Products, Fertiliser.
