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Core industry’s growth – Shanmugam IAS Academy
Core industries


What’s in news?

Growth in the eight core sectors of the economy collapsed to 0.2 per cent in June, a staggering 50-month low, dragged down by major contraction in the energy segment and weak performance across industries.

Key data’s:

  • The data was released by the Ministry of Commerce and Industry.
  • Four of the eight industries making up the core sectors, which contribute almost 40 per cent to the country’s total industrial production, registered a contraction in the month.
  • This is symptomatic of stagnation setting in the domestic industry.

Contracted fields / Industries:

  • June’s freefall growth rate is blamed largely on refinery production, which commands almost 30 per cent of the index, by weight.
  • The sector saw a 9.3 per cent contraction in the latest month, much more than the 1.5 per cent fall in May.
  • The closure of key refining units and sudden changes to the oil import value chain has led to repeated volatility in the sector in 2019.
  • Crude oil production went down by 6.8 per cent in June, compared to 6.9 per cent in May, the highest margin of contraction in the past 12 months. In June, natural gas production also contracted by 2.1 per cent, after registering zero growth in May.
  • The cement and steel sectors also saw their performance weaken in June.
  • Steel output growth was slashed by more than half in June, with growth rate standing at 6.9 per cent, down from 15.3 per cent in May. Another sector indicating the health of construction and infrastructure development — cement — saw production contract by 1.5 per cent, after rising by 2.8 per cent in May. 

Gain / Raised rate in fields / industries:

  • Coal output growth gained pace, rising by 3.2 per cent in June, up from May’s growth of 1.8 per cent. Production had hit a high of 9.1 per cent in March.
  • Electricity generation rose by 7.3 per cent in June, slightly lower than 7.4 per cent growth in May. Growth in the electricity sector had dipped to its lowest point in the last 71 months in January.
  • Fertilizer production rose in June by 1.5 per cent, after going down by 1 per cent in May. The sector had grown four months out of the six in the current calendar year.

Index of Eight Core Industries (ICI):

  • The 8 core industries are – Natural Gas, Coal, Crude Oil, Fertilizers, Petroleum Refinery Products, Steel, Cement and Electricity.
  • ICI is monthly production volume index considered as lead indicator of monthly industrial performance.
  • It is calculated by using Laspeyre’s formula of weighted arithmetic mean of quantity relatives.
  • It measures collective and individual performance of production in selected eight core industries.
  • It is compiled and released by Office of Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry.
  • The eight infrastructure sectors, constitute 40.27% of total Index of Industrial Production (IIP) (Based on the data released on December’2018).
  • Components and weightages covered in ICI:
    • Electricity generation.
    • Petroleum Refinery production.
    • Steel production.
    • Coal production.
    • Crude Oil production.
    • Natural Gas production.
    • Cement production.
    • Fertilizers production.


Links to note:

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