Core sectors expand by 5.7%

Output from the eight core infrastructure industries grew at the fastest pace in 15 months, clocking a 5.7 per cent growth in February.
Highlights
Coal
Coal production (weight: 4.38 %) increased by 3.9 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 5.0 % over corresponding period of previous year.
Crude Oil
Crude Oil production (weight: 5.22 %) increased by 0.8 % in February 2016 over February, 2015. However, Its cumulative index during April to February, 2015-16 decreased by 1.0 % over the corresponding period of previous year.
Natural Gas
The Natural Gas production (weight: 1.71 %) increased by 1.2 % in February, 2016 over February, 2015. And Its cumulative index during April to February, 2015-16 declined by 3.6 % over the corresponding period of previous year.
Refinery Products (93% of Crude Throughput)
Petroleum Refinery production (weight: 5.94%) increased by 8.1 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 3.1 % over the corresponding period of previous year.
Fertilizers
Fertilizer production (weight: 1.25%) increased by 16.3 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 10.3 % over the corresponding period of previous year.
Steel (Alloy + Non-Alloy)
Steel production (weight: 6.68%) declined by 0.5 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 declined by 1.8 % over the corresponding period of previous year.
Cement
Cement production (weight: 2.41%) increased by 13.5 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 3.9 % over the corresponding period of previous year.
Electricity
Electricity generation (weight: 10.32%) increased by 9.2 % in February, 2016 over February, 2015. Its cumulative index during April to February, 2015-16 increased by 4.6 % over the corresponding period of previous year.
Analysis:

• This gives enough reasons for the industry to presume that a stable recovery of industrial production is on the cards. The core sector accounts for 38 per cent in the index of industrial output. All sectors, barring steel, put up a better show. Steel production remains poor owing to sluggish demand and pressure on margins of firms in the wake of dumping from China.
• While production in fertiliser, electricity, cement, and refinery products registered an impressive growth, slow moving sectors such as crude oil and natural gas bounced to the positive zone after remaining in the negative region for months.
• The better performance from the infrastructure sector is good news for the government that has scaled down GDP growth projection for 2015-16. The government is hoping growth would stabilise in the remaining period of the fiscal to achieve targeted GDP growth level. The good show in February is largely attributed to the impressive 16.3 per cent growth seen in fertiliser production
• Despite the improvement, steel remained the only core to record a contraction in February, thanks to poor demand from end-users as well as the availability of cheaper imports.
• Domestic steel production has been badly hit by cheaper imports, especially after Chinese mills started dumping in the global market to cut huge inventory
• Core sectors growth is positive sign , but still it is not at optimal pace. Today the main problem is that no one is spending. Households are not spending due to high inflation. Corporate are not spending as they have excess capacity. Infrastructure is stuck for various reasons. Government is constrained by fiscal deficit. So, government should take more steps to infuse growth into core sectors.

By: Vishal