Output at India’s eight core sectors strengthened hearteningly in June, with the overall year-on-year growth in production estimated to have quickened to a five-month high of 8.2%. Seven of the sectors, including steel and cement and electricity, logged appreciable advances. Steel, which is the third-largest constituent of the index of eight core industries with a weight of just under 18%, was the standout performer, as output of the key alloy surged 21.9% undergirding the wider advance in the index. And cement posted an almost double-digit increase reflecting the continuing momentum in demand, a slight softening in the pace from the preceding two months on account of the onset of monsoon rains notwithstanding. Steel and cement led the cross-sectoral advance over the April-June period, growing 15.9% and 12.2%, respectively, in the fiscal first quarter. A key driver of demand for these two construction essentials continues to be the infrastructure sector, where the government’s efforts to boost outlays including on affordable housing, urban renewal and transportation networks are providing a palpable tailwind. Total capital expenditure by the Centre in June jumped more than 62% year-on-year and almost 24% from the preceding month to ₹1.10 lakh crore, Controller General of Accounts data showed.
Electricity, which makes up a fifth of the core index, also posted its strongest increase in four months despite a cyclonic storm that impacted highly industrialised Gujarat the most, dampening demand. Coal output also rose 9.8% in June, lifting the first-quarter’s production by 8.7%. And official data on Tuesday showed output in July surged more than 14%, another positive augury given that coal demand extends beyond the electricity sector to other industrial segments including metal making and process industries where it is used in furnaces and boilers. To be sure, other data from the eight core sectors do point to areas of concern. For all the talk of Aatmanirbharta, India’s efforts to secure a degree of independence in the crucial oil sector are yet to yield meaningful dividends; the country is still heavily reliant on crude imports for its overall fuel needs. This is best reflected in the fact that crude oil production remained in the doldrums for a 13th straight month, contracting 0.6%. Along with refinery products, which have the heaviest weight of 28% on the index, crude oil also registered a sequential slide underlining the difficulties the oil sector as a whole continues to face because of regulatory inconsistencies. Policymakers have their task cut out to ensure the policy environment remains supportive especially at a time when global demand remains particularly uncertain.
