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India's Core Sector Output Rises 1.7% in April, Boosted by Steel and Cement
India's eight core sectors saw output growth of 1.7% in April, a 50 basis-point increase from March, driven by stronger performances in steel, cement, and electricity. Despite a contraction in fertilizer output.
April Sees Modest Core Sector Expansion
India's eight core sectors recorded a 1.7% output expansion in April, marking a 50 basis-point increase from the revised 1.2% growth in March. This improvement was partly due to stronger output in steel and electricity, which hold significant weight within the core industrial index. Conversely, the fertilizer sector experienced a contraction, though the pace of decline slowed.
Despite this progress, growth faces headwinds from West Asia's crisis, ongoing supply-side challenges, and elevated energy prices, which continue to exert downward pressure.
Sectoral Performance Overview
Fertilizer output contracted by 8.6% in April, a notable improvement from the 24.6% decline recorded in March—the steepest since data collection began in April 2012. Meanwhile, the steel and electricity sectors expanded by 6.2% and 4.1%, respectively. India Ratings & Research (Ind-Ra), noted that better gas availability contributed to the improved performance in the fertilizer industry compared to March, with projections for further improvements from May onwards.
Analysis of five of the eight core segments revealed a contraction in output for the second consecutive month amid the West Asia crisis. These sectors include coal, crude oil, natural gas, refinery products, and fertilizers. Coal output reached a nine-month low with 8.7% growth in April, while crude oil contracted by 3.9%. Output in refinery products, which carries a 28.04% weight in the index, contracted by 0.5% after a slight 0.1% uptick in March. Natural gas output fell by 4.3% in April, reversing a 6.4% growth in March. Cement, however, saw a three-month peak with 9.3% growth, up from 4.7% in March. Electricity output also hit a three-month peak during the month.
Output Indices and Future Outlook
The overall Index of Core Industries (ICI) declined to a five-month low of 166 in April from 185.1 in March. Output indices for coal, steel, and cement also fell to multi-month lows. The coal index dropped to a seven-month low of 163.7, steel to a three-month low of 232.8, and cement to a five-month low of 223.7.
The core sectors collectively constitute approximately 40% of the Index of Industrial Production (IIP). Contractions across five sectors in April likely contributed to the subdued IIP growth, with official data for April expected on June 1, based on a new 2022-23 baseline. Ind-Ra anticipates average industrial production growth of approximately 5% in April, attributing it to an improved core growth. Ind-Ra also projects core sector recovery to continue with an approximate 3% growth in May, driven by a low base and likely enhanced fertilizer production.
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