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Among the recent data releases indicating that all is not well with the economy, is the core industry growth data. The latest numbers show that core sector industries grew a meagre 1.7 per cent in November, sharply down from 5.8 per cent in the same month last year. However, some solace, if at all, can be drawn from the fact that growth has picked up since October 2013, when the sector contracted 0.6 per cent.
Released prior to the Index of Industrial Production (IIP), the core industry data provides a quick snapshot of India’s industrial performance.
What is the core? Data on eight industries – coal, petroleum refined products, cement, electricity, steel, fertiliser, crude oil and natural gas – is used to compute the core industry growth.
These industries form the backbone of the economy. The Ministry of Commerce and Industry publishes this data every month. The year-on-year movement in the core sector index captures the growth in output (volume) of the eight sectors. The index is calculated as a weighted average of the individual core industry indices.
Together the core sector industries account for 38 per cent weight in the IIP. The IIP, which is a broader measure of industrial activity, includes the output of other segments, such as manufactured products, metals, chemicals and motor vehicles, apart from these eight.
The core industry index, which is compiled by the Central Statistical Organisation, is based on submissions from several agencies, such as the Indian Bureau of Mines, Ministry of Petroleum and Natural Gas, Joint Plant Committee (iron and steel), Central Electricity Authority and Department of Industrial Policy and Promotion.
Growth Trends The lacklustre industrial growth recorded in November 2013 is explained by the poor performance of natural gas and petroleum refinery products. Production in these two sectors (comprising a fifth of the core industry) declined 11 and 5 per cent, respectively. Sectors such as electricity, cement and steel, however, put up a good show, growing 4-6 per cent during the month. While the monthly data offers some information, a clearer picture on how each of these industries have been faring emerges from a longer period analysis. Take, for instance, the current fiscal (April-November) – even as most sectors witnessed growth, natural gas production slumped 15.5 per cent. In fact, of all the industries, it is the output of natural gas which has been on a downtrend for the longest duration (since November 2010). That output from Reliance Industries’ KG D6 block has been on a decline, makes this hardly surprising.
What’s more, an analysis of data also throws light on the cyclical production trend followed by some of the core sector industries. For instance, coal production usually starts to peak towards March and thereafter declines. With mining operations taking a hit on account of the monsoon, production slumps in September.
As for cement production, it trends downwards between March and September, only to rise thereafter, in line with the construction cycle. Fertiliser production too is seen to follow a pattern – much lower production in March and April relative to other months. This is reflective of the annual maintenance shutdowns taken by most fertiliser plants during March.
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