August production was 3.9% higher than pre-COVID levels.
Production picks up in eight major regions of India second consecutive month In August, four sectors posted strong double-digit growth, up 11.6%, compared to a 6.9% contraction recorded a year ago, though crude oil and fertilizer production declined.
Compared to July, August production was 3.9% higher than pre-COVID levels, registering a 1.1% rise from 2019 levels. Cement production grew by 36% in August 2020 compared to a contraction of 14.5%, while coal and natural gas registered a growth of 20.6%. Electricity and refinery products increased by 15.3% and 9.1%, and steel production increased by 5.1%.
All sub-sectors except refinery products and crude oil were above pre-COVID levels, noted ICRA chief economist Aditi Nair. “Lack of rains supported growth in coal, cement and power, while higher mobility fueled growth in petroleum refinery products,” she said.
Core sector output was up 9.9% in July and 9.3% in June. The Economic Advisory Office of the Department for Promotion of Industry and Internal Trade said the growth rate for the index of eight core industries for May has been revised upwards to 16.4% from its earlier provisional level of 16.8%.
CARE Chief Economist Madan Sabnavis said the rise in steel and cement can be attributed to higher government spending and construction activity. He added that higher power generation reflects a general booming activity in the economy and this will lead to an increase in production in mining as well.
“Overall, core sector growth is encouraging as it points to further acceleration during the year as the government moves all ministries down to spend more as indicated,” Mr. Sabnavis said.
Ms Nair warned that gains in mining, construction and power are likely to be washed away by September rains, even if the negative ground from last year’s lockdown normalises.
“For example, electricity demand has fallen below 1% in the current month, as agricultural and domestic demand has been reduced by heavy rains. Overall, we expect core sector growth to moderate to 4-6% in September,” she said.
ICRA and CARE Ratings expect the index of industrial production (IIP) to rise between 11-12 per cent in August, similar to the 11.5% recorded in July.
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