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India’s core sector growth slows in March to a 5-month low

EconomyIndia's core sector growth slows in March to a 5-month low

The combined output of India’s eight core industries dropped to a five-month low of 3.6% year-on-year in March 2023.

According to data released by the Indian government on April 30, 2023, India’s core sector growth slowed down in March to a 5-month low. The core sector of India comprises eight key infrastructure sectors, including coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. These sectors have a combined weight of 40.27% in the Index of Industrial Production (IIP).

As per the data, the eight infrastructure sectors recorded a growth of 2.5% in March 2023, which is the lowest growth rate in five months. In comparison, the sectors had grown by 7.2% in February 2023. The slowdown in growth can be attributed to various factors, including rising input costs, supply chain disruptions, and weaker demand.

Among the eight sectors, the steel sector showed the highest growth of 7.7% in March 2023, followed by the cement sector with a growth rate of 5.5%. On the other hand, the crude oil and natural gas sectors showed a decline of 2.3% and 3.7%, respectively, during the same period.

The slowdown in core sector growth is a matter of concern as it could impact the overall economic growth of the country. The Indian government has been taking various measures to boost the economy, including fiscal stimulus packages and easing of monetary policy. However, the impact of these measures is yet to be seen.

In conclusion, the slowdown in core sector growth in March 2023 to a 5-month low is a matter of concern for the Indian economy. The government and policymakers need to take steps to address the challenges faced by these key sectors to ensure sustained growth in the future.

“The combined Index of Eight Core Industries (ICI) increased by 3.6 percent (provisional) in March 2023 as compared to the Index of March 2022. The production of Coal, Fertilizers, Steel, Natural Gas, and Refinery Products increased in March 2023 over the corresponding month of last year,” an official release said.

The index of eight core industries measures the combined and individual performance of the production of eight core industries viz. coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. It comprises 40.27% of the weight of items included in the Index of Industrial Production (IIP).

Commenting on core sector data, ICRA Chief Economist Aditi Nayar said, “The halving in the YoY core sector growth to a five-month low of 3.6% in March 2023 from 7.2% in February 2023, was fairly broad-based, with only coal and crude oil displaying a sequential improvement.”

She further said that dampened by a high base and heavy rainfall, the YoY performance of most of the available high-frequency indicators weakened in March 2023, relative to February 2023, similar to the trend in the core sector.

The contraction of India’s economy in FY 2021 was still among the worst for G-20 countries. In April 2020, the Centre for Monitoring Indian Economy reported that 122 million were suddenly jobless, a jump from our estimate of 30 million in 2018–2019 (Mehrotra & Parida, 2020).

Apart from COVID, the economy slumped post-demonetization and GST.

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