Base effect led to India’s eight major industries’ output sky-rocketing during April 2021.
The Index of Eight Core Industries’ reading for last month showed an expansion of over 56 per cent from a (-) 37.9 per cent dip in output during the same month of last year.
On a sequential basis, the output of eight major industries had risen by 11.4 per cent in March 2021.
The pandemic-triggered national lockdown (from late March 2020) during Q1FY21 had a massive impact on the economy, which suffered a GDP contraction of 24.4 per cent. It was only on June 1, 2020 that the partial unlock measures were implemented.
However, in April 2021, localised lockdowns were again implemented following a surge of cases.
The ECI index comprises 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
These industries comprise coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity.
On a sector specific basis, the output of coal, which has a weight of 10.33 per cent in the index, showed a growth of 9.5 per cent in April 2021 over the same month of the previous year.
Similarly, the output of refinery products, which has the highest weightage of 28.04, rose by 30.9 per cent, compared to the corresponding month of the last fiscal.
Electricity generation, which has the second highest weightage of 19.85, rose by 38.7 per cent, whereas steel production was up 400 per cent last month.
However, the extraction of crude oil, which has an 8.98 weightage, declined by (-) 2.1 per cent during the month under consideration, but the sub-index for natural gas output, with a weightage of 6.88, rose by 25 per cent.
Cement production, which has a weightage of 5.37, rose by 548.8 per cent in the month under review.
Fertiliser manufacturing, which has the least weightage — only 2.63 — inched up by 1.7 per cent.
“As expected, the low base of the nationwide lockdown pushed up the core sector expansion to 56 per cent in April 2021, a shade lower than our forecast of around 60 per cent. The improvement was fairly broad-based, with an expected spike in the growth of cement and steel, although both lagged our projections suggesting some impact of the regional lockdowns on activity,” ICRA’s Chief Economist Aditi Nayar said.
“The range of outcomes in April 2021 was huge, with a continued contraction in crude oil reflecting an insulated mining sector during the lockdown, and a massive 549 per cent YoY expansion in cement.”
India Ratings & Research’s Chief Economist Devendra Kumar Pant said: “Core infrastructure industries data is first set of information of FY22 with regional or localised lockdowns. April 2021 growth is high due to a weak base. However, this data suggests that while all states individually implemented lockdowns, these are not as stringent as nationwide lockdowns of April and May 2020. All sectors except crude oil registered positive growth in April 2021.”
“Even IIP growth in April 2021 is likely to be strong due to weak base in April 2020. However, weak demand conditions are unlikely to keep this growth momentum strong in coming months.”