BackSlowing coal, crude oil output drags down core sector growth
The sectors -coal, crude, natural gas, refinery products, fertilisers, cement, steel, and electricity-- expanded by 4.3% in March compared to 6% in February, data released by the ministry of commerce and industry showed on Friday
PremiumBENGALURU : Growth in the eight infrastructure sectors of the economy slowed in March after recovering to a four-month high in the previous month after supply-side disruptions caused a contraction in coal and crude oil output and a slowdown in some others.
The sectors—coal, crude, natural gas, refinery products, fertilizers, cement, steel and electricity—expanded by 4.3% in March from 6% in February, data released by the ministry of commerce and industry showed on Friday. However, fertilizers, cement and electricity posted a swift recovery.
“The first signs of the power problem that we have today could be seen in a decline in coal output compared to last year. Power growth, however, was steady. Crude oil production has fallen due to production constraints. Refinery products, however, were aided by exports and revival in domestic consumption with the full opening of the economy," said Madan Sabnavis, chief economist, Bank of Baroda.
He estimated the Index of Industrial Production (IIP) for March at 2.5-3%. “Higher inflation with fuel prices being increased would come in the way of revival of consumption," cautioned Sabnavis.
The eight core industries hold 40.27% weight in the IIP.
Coal output shrank by 0.1% in March from a 6.8% growth in February and a 0.3% growth in the corresponding month last year. States facing blackouts due to a coal shortfall at thermal plants include Delhi, Punjab and Uttar Pradesh. On Friday, the Centre cancelled some passenger train services to allow for faster movement of coal carriages. According to reports, coal reserves in India’s power plants are down 17% since the beginning of the month and are a third of the required levels.
Crude oil continued to be in the contractionary zone, posting a 3.4% decline from a 2.2% drop in the previous month.
A slowdown was seen in natural gas, which grew 7.6% against 12.5% in February. Steel grew by 3.7% compared with 5.9% in February.
Cement and fertilizers reported a sharp recovery. Cement recovered to 8% in March compared with 5% growth in the previous month. Similarly, fertilizers reported a 15.3% growth in March compared with a 1.4% contraction in the previous month.
Meanwhile, electricity production grew 4.9% from a year earlier in March.
The production of petroleum refinery products, the sector with the highest weightage (28.04%) in the index, saw growth slow down marginally to 6.2% in March compared with 8.8% in February.
Aditi Nayar, chief economist of ICRA Ltd, said the disaggregated data remained quite mixed, with a discordant contraction in coal and crude oil interspersed with double-digit expansion in fertilizers in March. “The double-digit growth recorded by fertilizer output in March came on a very low base," added Nayar. She further pointed out that while the growth of the core sector output and non-oil merchandise exports slowed in March, several high-frequency indicators witnessed an improvement. As a result, she expects IIP growth to rise modestly to 3-3.5% during the month from a year earlier.
On a cumulative basis, the index of eight core industries grew 10.4% in FY22 against a 6.4% contraction in the previous year.
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