Low base effect propels March core sector output to 32-month high

The output of eight core sectors expanded by 6.8 per cent in March — the highest in 32 months — driven by a base effect-led uptick in production of natural gas, steel, cement and electricity, official data showed on Friday.

The growth rate of the eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — was recorded at (-) 8.6 per cent in March last year.

According to the data released by the Commerce and Industry Ministry on Friday, production of natural gas, steel, cement and electricity jumped 12.3 per cent, 23 per cent, 32.5 per cent and 21.6 per cent this March, as against (-) 15.1 per cent, (-) 21.9 per cent, (-) 25.1 per cent and (-) 8.2 per cent in March 2020, respectively.

Coal, crude oil, refinery products and fertiliser segments, meanwhile, recorded negative growth during the month under review.

During the full fiscal 2020-21 (April-March), the production of the eight sectors contracted by 7 per cent as against a positive growth of 0.4 per cent in 2019-20.

Commenting on the numbers, Icra Ltd chief economist Aditi Nayar said the 6.8-per cent growth in March, a “32-month high”, is due to the base effect.

The low base of the lockdown-affected April 2020 would push up the year-on-year expansion of the index of eight core industries to a sharp 50-70 per cent in April 2021, with exceptionally high growth expected in cement and steel, she further said.

“However, we have observed a slackening in the sequential momentum in April 2021 in electricity demand, vehicle registrations, and generation of GST (goods and services tax) e-way bills, revealing the impact of the recent surge in Covid infections and localised restrictions.

“Based on the available data, we project the Index of Industrial Production (IIP) to record a sharp growth of 17.5-25 per cent in March 2021,” Nayar added.

In February 2021, the output of these sectors had dipped by 3.8 per cent.

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