India’s core manufacturing grew its fastest in four months, up 5.8% in February, compared to January’s 4% growth, with six out of eight sectors reporting growth. Crude oil and fertilizer production fell 2.2% and 1.4%, respectively, year-on-year.
Economists attributed February’s numbers mostly to the base effect as February 2021 had seen core sector output fall by 3.3%. In fact, the composite index of eight core industries released on Thursday fell 5.3% compared to January 2022, with all sectors posting month-on-month declines.
Cement, for example, grew by 5% compared to February 2021, but production was 4.4% lower than in January 2022. Likewise, the production of refined products increased by 8.8%, but 7.3% less than in the previous month.
Steel production grew for the second straight month after contracting in December, rising 5.7% in February. Power generation grew 4%, while natural gas and coal production increased 12.5% and 6.6%, respectively.
The continued decline in crude oil and fertilizer and the sharp slowdown in cement production growth set a sobering note, said ICRA chief economist Aditi Nayar, who estimates the industrial production index (IIP) for February to be less than 2.5%. Core sectors account for about 40% of IIP.
India Ratings and Research economists Sunil K. Sinha and Paras Jasrai noted that the 5.8% growth in core sectors from last February was achieved on a low base, while crude oil, refining and fertilizer production is still below pre-pandemic levels.
“Production of other core segments is also just above pre-COVID levels. This shows that there is still a long way to go in terms of reviving core sectors’ production, and the disruption to global supply chains may further affect the availability of key commodities such as natural gas and coal in the domestic market. , they said.
