The low base of last year due to the stringent national lockdown aided in propping up India’s eight major industries’ output during May 2021, on a year-on-year basis.
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.
Unlike last year, the lockdown in 2021 was more regional in nature, and production and manufacturing by several industries were allowed this time around.
Accordingly, the Index of Eight Core Industries’ (ICI) reading for last month showed an expansion of 16.8 per cent from a decline of 21.4 per cent in output during the same month of the last year.
On a sequential basis, however, the output of eight major industries declined 3.74 per cent in May at 125.8 (index reading) from 130.7 recorded in April.
Similarly, the core index in May 2021 was 8 per cent lower than the pre-Covid level of May 2019.
“The combined Index of Eight Core Industries stood at 125.8 in May 2021 which increased by 16.8 per cent (provisional) as compared to the Index of May 2020,” the Ministry of Commerce & Industry said in a statement.
“The production of coal, natural gas, refinery products, steel, cement, and electricity industries increased in May 2021 over the corresponding period of last year.
“Besides, the final growth rate of Index of Eight Core Industries for February 2021 is revised to (-) 3.3 per cent from its provisional level (-) 4.6 per cent.”
The ICI 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 6.9 per cent in May 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 15.3 per cent, compared to the corresponding month of the last fiscal.
Electricity generation, which has the second highest weightage of 19.85, rose by 7.3 per cent, whereas steel production was up 59.3 per cent last month.
However, the extraction of crude oil, which has an 8.98 weightage, declined by 6.3 per cent during the month under consideration, but the sub-index for natural gas output, with a weightage of 6.88, rose by 20.1 per cent.
Cement production, which has a weightage of 5.37, rose by 7.9 per cent in the month under review.
Fertiliser manufacturing, which has the least weightage — only 2.63 — fell by 9.6 per cent.
“With the base becoming less distorted and the widening of state-wise restrictions, the core sector expansion expectedly flattened to 16.8 per cent in May 2021 from the high 61 per cent in April 2021,” said ICRA’s Chief Economist Aditi Nayar.
“With the growing state level restrictions, cement, electricity, refinery products, steel and crude oil reported a sequential decline, whereas coal, natural gas and fertilisers displayed a month-on-month rise in volumes.”
India Ratings & Research’s Principal Economist Sunil Kumar Sinha said: “The level of core sector output of May 2021 does not provide an encouraging picture as industries were allowed to remain operational during Covid 2.0 related lockdowns albeit with strict Covid protocols or lower employee headcounts.”
“Clearly the path to a meaningful industrial growth recovery is still hazy because core sector has 40.27 per cent weight in the Index of Industrial Production (IIP).”
