Normalising base eases India's Sep core sector growth

New Delhi, Oct 29 Normalising base, as well as heavy rainfall, eased the growth rate of India's eight major industries in September, on a sequential basis.

The Index of Eight Core Industries' (ICI) readings for last month showed a slower rate of expansion at 4.4 per cent (provisional) from a rise of 11.5 per cent (provisional).

However, on a year-on-year basis, the ICI readings during the period under review were higher than 0.6 per cent reported for September 2020.

The ICI index comprises 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP), and comprises coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity.

"The combined Index of Eight Core Industries stood at 126.7 in September 2021, which increased by 4.4 per cent (provisional) as compared to the Index of September 2020," a Ministry of Commerce and Industry statement said.

"The production of coal, natural gas, refinery products, fertilisers, steel, cement and electricity industries increased in September 2021 over the corresponding period of last year."

As per the statement, the final growth rate of the ICI for June 2021 has been revised to 9.4 per cent from its provisional 8.9 per cent.

"The growth rate of ICI during April-September 2021-22 was 16.6 per cent (P) as compared to the corresponding period of last FY," it said.

On a sector-specific basis, the output of coal, which has a weightage of 10.33 per cent in the index, showed a growth of 8.1 per cent in September 2021 over the same month of the previous year.

Similarly, the output of refinery products, which has the highest weightage of 28.04 per cent, rose by 6 per cent, compared to the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85 per cent, inched up by just 0.3 per cent, whereas steel production was up 3 per cent last month.

However, the extraction of crude oil, which has a weightage of 8.98 per cent, declined by 1.7 per cent during the month under consideration, though the sub-index for natural gas output, with a weightage of 6.88 per cent, rose by 27.5 per cent.

Cement production, which has a weightage of 5.37 per cent, rose by 10.8 per cent in the month under review.

Fertiliser manufacturing, which has the least weightage only 2.63 per cent inched up by 0.02 per cent.

Acuite Ratings & Research's Chief Analytical Officer Suman Chowdhury said: "The growth in the core sector has started to normalise with 4.4 per cent YoY in Sep-21 as compared to 11.5 per cent YoY in Aug-21 with the lower effect of a favourable base.

"In addition, a slowdown in the recovery of the core industrial sector is clear from the fact that all the eight core sectors without exception have shown a sequential decline."

ICRA Chief Economist Aditi Nayar said: "With the base effect wearing off and copious rainfall dampening mining and construction activities, as well as demand for electricity, the core sector growth slid to 4.4 per cent in September 2021, in line with our expectations.

"Lower core sector growth and the impact of semiconductor shortages on auto output are expected to dampen the September 2021 IIP growth to 3-5 per cent, despite the pre-festive season inventory buildup suggested by the GST e-way bill data."