Growth in output of the eight-industry core sector accelerated to 11.6 per cent in August from 9.9 per cent in the previous month even as the base effect was less beneficial. The core sector industry had contracted 6.9 per cent in August last year against 7.6 per cent in July.
However, two industries — crude and fertiliser– saw decline in output in August against only crude in July. Already, there are reports of fertilser shortage faced by farmers ahead of Rabi sowing in various parts of the country.
Core sector output grew 19.3 per cent in the first five months of the current financial year against 17.3 per cent contraction in the corresponding period of the previous financial year.
The core sector in August this year recorded a 3.9 per cent rise from the pre-covid August 2019 too. Only refinery products and crude production was lower over this period.
However, when it comes to pre-covid level of February, 2020, core sector output in August, 2021 was still 0.3 per cent lower.
But, the picture at disaggregated level is more encouraging, said Sunil Kumar Sinha, principal economist at India Ratings. Except coal, refinery products and cement, all other core industries has surpassed the pre-Covid level on this parameter.
Industries that showed higher output levels than February 2020 are crude oil (105 per cent), natural gas (126.3), fertilizer (108.5), steel (103.5) and electricity (122.2), said Sinha.
He believed that core sector industries at an aggregate level will cross the pre-Covid level of production next month.
India Ratings believed that the index of industrial production (IIP) would also show an encouraging trend in August.
The Core sector has 40.3 per cent weight in IIP. Industrial production growth declined to 11.5 per cent in July than 13.5 per cent in June because of normalisation of the base.
However, ICRA in a note said although core sector growth has improved, the weaker trends in auto production are likely to weigh upon the manufacturing output in August 2021, resulting in an IIP growth of around 11-12%, similar to the July 2021 print.
It also warned that the August gains to sectors such as mining, construction and electricity, are likely to be washed out by the September rains, exacerbating the impact of the normalising base