The eight core sectors grew by 6.8% in March 2021, after a 3.8% dip in February, but the spike was largely due to the base effects from March 2020, when a national lockdown impacted industrial activity.
Economists said core sector numbers for March came in below expectations and that the uptick was misleading. Steel, cement, electricity and natural gas production recorded a sharp double-digit percentage rise from a year ago, but four sectors remained in the red despite a low base — coal (-21.9%), fertilizers (-5%), crude oil (-3.1%) and petroleum refinery products (-0.7%).
The core sectors constitute 40.27% weightage in the Index of Industrial Production (IIP) and Care Ratings chief economist Madan Sabnavis said industrial output is expected to grow by close to 10% since it had dipped 16.7% in March 2020.
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“The March, April and May growth numbers for core sector and industrial growth was expected to be high and misleading as they come on the back of sharp declines registered last year. Hence, core sector growth of 6.8% in March must be interpreted with caution,” he said, adding that core sector output fell by 7% in 2020-21 — the first such instance in eight years.
ICRA chief economist Aditi Nayar expressed surprise at the sharp shrinkage in coal output and the milder contraction in fertilizers, crude and petroleum products. “We had expected the core sector to expand by around 10% in March 2021,” she said. ICRA still anticipates a 17.5% - 25% growth in the IIP for March.