Nov-21 core sector expands 3.1% as crude oil and cement drag
- India Infoline News Service
- 03 Jan , 2022
- 9:05 AM
If you look at the core sector graphic over the last 13 months, the core sector growth has been positive in 11 out of the 13 months. Of course, the core sector growth between Mar-21 to Aug-21 was slightly misleading as it looks optically high due to a low base. Post September, that base effect has got neutralized, so growth is more sustainable now.
Meanwhile, final revisions in core sector growth for Aug-21 marked a substantial upgrade from 11.6% to 12.2%. At the same time, the first revision for Oct-21 raised the core sector growth sharply from 7.5% to 8.4%. The good news is on the 2-year growth front. If you consider the core sector number for Nov-21 and compare with Nov-19, then core sector is actually up 1.97% indicating that COVID impact on growth may have been neutralized.
Core or infrastructure sector acts as a lead indicator for IIP and GDP growth. That is largely because it has a weightage of 40.27% in IIP growth. If you look back at a 2-year comparison of 2021 over 2019, Jul-21 was the first month when core sector was above Jul-19 levels and Aug-21 numbers built on that. In Sep-21, the 2-year growth was above 5% and in Oct-21, it was closer to 7%. However, in November, core sector growth tapered to 1.97% on a 2-year basis, but this marks the fifth month in succession of growth above 2019 levels.
FY22 core sector 108 bps above FY20 levels
Core sector growth on a monthly basis is a lot more reflective of the current situation and the evaporating base effect, so it adds value as a momentum indicator. But we still need to understand if the pain of COVID has been overcome on a cumulative basis. For that the data of the first 8 months of FY22 can be compared to the first 8 months of FY20.
The cumulative growth for Apr-Nov 2021 period is pegged at +13.7%. This is against -11.1% contraction in the Apr-Nov 2020 period, which was the COVID peak. That means, on a pre-COVID basis, core sector is now 1.08% above corresponding 2019 levels.
How the 8 core sectors fared; yoy and sequentially
Here we look at the break-up of the core sector based on YOY indicators, pre-COVID growth and high-frequency growth.
Meanwhile, final revisions in core sector growth for Aug-21 marked a substantial upgrade from 11.6% to 12.2%. At the same time, the first revision for Oct-21 raised the core sector growth sharply from 7.5% to 8.4%. The good news is on the 2-year growth front. If you consider the core sector number for Nov-21 and compare with Nov-19, then core sector is actually up 1.97% indicating that COVID impact on growth may have been neutralized.
Core or infrastructure sector acts as a lead indicator for IIP and GDP growth. That is largely because it has a weightage of 40.27% in IIP growth. If you look back at a 2-year comparison of 2021 over 2019, Jul-21 was the first month when core sector was above Jul-19 levels and Aug-21 numbers built on that. In Sep-21, the 2-year growth was above 5% and in Oct-21, it was closer to 7%. However, in November, core sector growth tapered to 1.97% on a 2-year basis, but this marks the fifth month in succession of growth above 2019 levels.
FY22 core sector 108 bps above FY20 levels
Core sector growth on a monthly basis is a lot more reflective of the current situation and the evaporating base effect, so it adds value as a momentum indicator. But we still need to understand if the pain of COVID has been overcome on a cumulative basis. For that the data of the first 8 months of FY22 can be compared to the first 8 months of FY20.
The cumulative growth for Apr-Nov 2021 period is pegged at +13.7%. This is against -11.1% contraction in the Apr-Nov 2020 period, which was the COVID peak. That means, on a pre-COVID basis, core sector is now 1.08% above corresponding 2019 levels.
How the 8 core sectors fared; yoy and sequentially
Here we look at the break-up of the core sector based on YOY indicators, pre-COVID growth and high-frequency growth.
| Core Sector Component | Weight | YOY over Nov-20 (%) | MOM over Oct-21 (%) | Apr-Nov YOY(%) |
| Coal | 10.3335 | +8.2% | +6.3% | +11.6% |
| Crude Oil | 8.9833 | -2.2% | -3.3% | -2.7% |
| Natural Gas | 6.8768 | +23.7% | -5.4% | +22.8% |
| Refinery Products | 28.0376 | +4.3% | +3.5% | +10.6% |
| Fertilizers | 2.6276 | +2.5% | -1.2% | -0.6% |
| Steel | 17.9166 | +0.8% | -5.0% | +25.3% |
| Cement | 5.3720 | -3.2% | -21.1% | +28.3% |
| Electricity | 19.8530 | +1.58% | -12.1% | +10.2% |
| Overall Core Sector Growth | 100.0000 | +3.1% | -4.1% | +13.7% |
Here are some important takeaways from the table above.
a) The first column is the weightage column which tells you how much a change in particular component can have on the overall core sector number. Refinery products, electricity and steel have an inordinately high combined weight of over 65%.
b) The second column is break-up of yoy core sector growth of 3.1%. Here, 6 out of 8 core sectors are in the positive. Crude and steel were hit by tepid demand in the light of downstream cuts. Natural gas has been the big gainer on favourable pricing.
c) The third column captures high-frequency sequential growth. We have a problem here as high frequency growth is negative. The surge in Omicron cases in India has resulted in a sudden loss of momentum with 6 out of the 8 core sectors lagging.
d) The last column covers cumulative data for the first 8 months of FY22. Last month, cumulative data was 60 basis points above the corresponding FY20 levels. This month, that 2-year growth has improved to 108 basis points.
e) The moral of the story is there is good news on the long term indicators, but short term momentum has been missed due to a surge in Omicron. That is the problem point.
What is the best case scenario for FY-2022?
Core sector has a 40.27% weightage in IIP and needs to provide the much-needed impetus if IIP and GDP have to pick up.
| Year | 2012-13 | 2013-14 | 2014-15 | 2015-16 |
| Core Sector Growth (%) | 3.8% | 2.6% | 4.9% | 3.0% |
| Year | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| Core Sector Growth (%) | 4.8% | 4.3% | 4.4% | 0.4% |
| Year | 2020-21 | Apr-Nov FY22 | ||
| Core Sector Growth (%) | -6.4% | 13.7% |
The first 8 months of FY22 look impressive at 13.7%, but that has a lot of base effect in it and the high frequency momentum is gradually waning. In the remaining 4 months of FY22, core sector must grow over 7% to bring the core sector output back to Apr-2019 levels. But, that would only mean that core sector would be back to where it was 3 years back.
A lot depends on how the Indian economy navigates the Omicron virus, global hawkishness and rising inflation. Unless core sector grows, the multiplier effect will not work.
Eight core sectors' output increases by 3.1% in Nov-21
- India Infoline News Service
- 03 Jan , 2022
- 11:22 AM
The production of Coal, Natural Gas, Refinery Products, Fertilizers, Steel and Electricity industries increased in November 2021 over the corresponding period of last year, the government data said.
The final growth rate of the Index of Eight Core Industries for August 2021 is revised to 12.2% from its provisional level of 11.6%. The growth rate of ICI during April-November 2021-22 was 13.7% (P) as compared to the corresponding period of last FY.
The summary of the Index of Eight Core Industries is given below:
Coal – Coal production (weight: 10.33 per cent) increased by 8.2 per cent in November 2021 over November 2020. Its cumulative index increased by 11.6 per cent from April to November, 2021-22 over corresponding period of the previous year.
Crude Oil – Crude Oil production (weight: 8.98 per cent) declined by 2.2 per cent in November, 2021 over November, 2020. Its cumulative index declined by 2.7 per cent during April to November, 2021-22 over the corresponding period of previous year.
Natural Gas - Natural Gas production (weight: 6.88 per cent) increased by 23.7 per cent in November, 2021 over November, 2020. Its cumulative index increased by 22.8 per cent during April to November, 2021-22 over the corresponding period of previous year.
Petroleum Refinery Products – Petroleum Refinery production (weight: 28.04 per cent) increased by 4.3 per cent in November, 2021 over November, 2020. Its cumulative index increased by 10.6 per cent during April to November, 2021-22 over the corresponding period of previous year.
Fertilizers – Fertilizers production (weight: 2.63 per cent) increased by 2.5 per cent in November, 2021 over November, 2020. Its cumulative index decreased by 0.6 per cent during April to November, 2021-22 over the corresponding period of previous year.
Steel – Steel production (weight: 17.92 per cent) increased by 0.8 per cent in November, 2021 over November, 2020. Its cumulative index increased by 25.3 per cent during April to November, 2021-22 over the corresponding period of previous year.
Cement – Cement production (weight: 5.37 per cent) decreased by 3.2 per cent in November, 2021 over November, 2020. Its cumulative index increased by 28.3 per cent during April to November, 2021-22 over the corresponding period of previous year.
Electricity – Electricity generation (weight: 19.85 per cent) increased by 1.5 per cent in November, 2021 over November, 2020. Its cumulative index increased by 10.2 per cent during April to November, 2021-22 over the corresponding period of previous year.
Dec-21 core sector expands 3.82% on cement and natural gas boost
- India Infoline News Service
- 01 Feb , 2022
- 8:21 AM
If you look at the core sector chart over last 13 months, growth has been positive in 12 out of these 13 months. The core sector growth between Mar-21 and Aug-21 may be slightly misleading as growth was magnified due to a low base. Post Sep-21, that base effect has got neutralized, so core sector growth is at more sustainable levels now.
Meanwhile, final revisions in core sector growth for Sep-21 marked a smart 100 bps upgrade from 4.4% to 5.4%. The first revision for Nov-21 raised core sector growth from 3.1% to 3.4%. If you consider core sector numbers for Dec-21 and compare with Dec-19, then core sector is up 4.24% indicating that core sector is now growing above pre-COVID levels.
Core or infrastructure sector is a very critical lead indicator for IIP and GDP growth. That is because core sector has a weightage of 40.27% in IIP growth. If you look at a 2-year comparison of 2021 over 2019, Jul-21 was the first month when core sector was above Jul-19 levels and Aug-21 numbers built on that. In Sep-21, the 2-year growth was above 5% and in Oct-21, it was closer to 7%. However, in November, core sector growth tapered to 1.97% on a 2-year basis. In Dec-21, the growth over Dec-19 levels stands at a healthy 4.24% indicating that there is now sustainable growth traction above 2019 levels. However, the hope is that the combination of global hawkishness and inflation don’t spoil the party.
FY22 core sector 157 bps higher than FY20 levels
Core sector growth on a monthly basis is a good high-frequency barometer of evaporating base effect. It surely adds value as a momentum indicator. However, we need to understand if the pain of COVID has been overcome on a cumulative basis. For that the data of the first 9 months of FY22 can be compared to the first 9 months of FY20.
The cumulative growth for Apr-Dec 2021 period is pegged at +12.6%. This is against -9.8% contraction in the Apr-Dec 2020 period, which was the COVID peak. Thus, on a pre-COVID basis, core sector is now 1.57% above corresponding 2019 levels; representing a 49 bps improvement over the cumulative number last month.
Story of 8 core sectors; yoy and sequentially
Here we look at the break-up of the core sector based on YOY indicators, pre-COVID growth and high-frequency growth.
Data Source: DPIIT
Here are important takeaways from the table above.
a) The first column is the weightage column which tells you how much a change in particular component can have on the overall core sector number. Refinery products, electricity and steel have a high combined weight of over 65%.
b) The second column is the break-up of yoy core sector growth of 3.8%. Here, 6 out of 8 core sectors are in the positive. Steel remains weak due to weak demand from auto sector. Natural gas has been the big gainer on favourable pricing, boosting output.
c) The third column captures high-frequency MOM growth. There has been a sharp turnaround in this segment. In Nov-21, 6 out of 8 components of core sector were in the negative while in December 6 out of 8 are in the positive, indicating that the likely impact of Omicron may have been blown out of proportions and this is a reality check.
d) The last column covers cumulative data for the first 9 months of FY22. Last month, cumulative data was 108 basis points above the corresponding FY20 levels. This month, that 2-year growth has improved to 157 basis points.
e) There are two positive inferences. Firstly, the long term secular trend is turning positive. Secondly, the short term impact of the Omicron variant seen in the previous month, has been more or less neutralized in December.
Where does core sector growth go from here?
Core sector has a 40.27% weightage in IIP and needs to provide the much-needed impetus if IIP and GDP have to pick up.
Data Source: DPIIT
The first 9 months of FY22 look impressive at +12.6%, but that is likely to gradually wane by Mar-22 as the base effect also wanes. In the remaining 3 months of FY22, core sector must grow over 6-7% to bring the core sector output back to Apr-2019 levels. That would still mean that core sector would just be back to where it was 3 years back.
For now it looks like the Omicron scare has been managed reasonably well. The bigger risk now is to handle the risks arising from a rise in inflation, Fed hawkishness and any populist signals from the Union Budget.
Meanwhile, final revisions in core sector growth for Sep-21 marked a smart 100 bps upgrade from 4.4% to 5.4%. The first revision for Nov-21 raised core sector growth from 3.1% to 3.4%. If you consider core sector numbers for Dec-21 and compare with Dec-19, then core sector is up 4.24% indicating that core sector is now growing above pre-COVID levels.
Data Source: DPIIT (Department for Promotion of Industry and Internal Trade)
Core or infrastructure sector is a very critical lead indicator for IIP and GDP growth. That is because core sector has a weightage of 40.27% in IIP growth. If you look at a 2-year comparison of 2021 over 2019, Jul-21 was the first month when core sector was above Jul-19 levels and Aug-21 numbers built on that. In Sep-21, the 2-year growth was above 5% and in Oct-21, it was closer to 7%. However, in November, core sector growth tapered to 1.97% on a 2-year basis. In Dec-21, the growth over Dec-19 levels stands at a healthy 4.24% indicating that there is now sustainable growth traction above 2019 levels. However, the hope is that the combination of global hawkishness and inflation don’t spoil the party.
FY22 core sector 157 bps higher than FY20 levels
Core sector growth on a monthly basis is a good high-frequency barometer of evaporating base effect. It surely adds value as a momentum indicator. However, we need to understand if the pain of COVID has been overcome on a cumulative basis. For that the data of the first 9 months of FY22 can be compared to the first 9 months of FY20.
The cumulative growth for Apr-Dec 2021 period is pegged at +12.6%. This is against -9.8% contraction in the Apr-Dec 2020 period, which was the COVID peak. Thus, on a pre-COVID basis, core sector is now 1.57% above corresponding 2019 levels; representing a 49 bps improvement over the cumulative number last month.
Story of 8 core sectors; yoy and sequentially
Here we look at the break-up of the core sector based on YOY indicators, pre-COVID growth and high-frequency growth.
| Core Sector Component | Weight | YOY over Dec-20 (%) | MOM over Nov-21 (%) | Apr-Dec YOY(%) |
| Coal | 10.3335 | +5.2% | +10.1% | +10.6% |
| Crude Oil | 8.9833 | -1.8% | +3.3% | -2.6% |
| Natural Gas | 6.8768 | +19.5% | +0.7% | +22.4% |
| Refinery Products | 28.0376 | +5.9% | +1.9% | +10.0% |
| Fertilizers | 2.6276 | +3.5% | -0.2% | -0.1% |
| Steel | 17.9166 | -1.0% | +6.8% | +22.1% |
| Cement | 5.3720 | +12.9% | +31.0% | +26.1% |
| Electricity | 19.8530 | +2.50% | +9.5% | +9.4% |
| Overall Core Sector Growth | 100.0000 | +3.8% | +7.1% | +12.6% |
Here are important takeaways from the table above.
a) The first column is the weightage column which tells you how much a change in particular component can have on the overall core sector number. Refinery products, electricity and steel have a high combined weight of over 65%.
b) The second column is the break-up of yoy core sector growth of 3.8%. Here, 6 out of 8 core sectors are in the positive. Steel remains weak due to weak demand from auto sector. Natural gas has been the big gainer on favourable pricing, boosting output.
c) The third column captures high-frequency MOM growth. There has been a sharp turnaround in this segment. In Nov-21, 6 out of 8 components of core sector were in the negative while in December 6 out of 8 are in the positive, indicating that the likely impact of Omicron may have been blown out of proportions and this is a reality check.
d) The last column covers cumulative data for the first 9 months of FY22. Last month, cumulative data was 108 basis points above the corresponding FY20 levels. This month, that 2-year growth has improved to 157 basis points.
e) There are two positive inferences. Firstly, the long term secular trend is turning positive. Secondly, the short term impact of the Omicron variant seen in the previous month, has been more or less neutralized in December.
Where does core sector growth go from here?
Core sector has a 40.27% weightage in IIP and needs to provide the much-needed impetus if IIP and GDP have to pick up.
| Year | 2012-13 | 2013-14 | 2014-15 | 2015-16 |
| Core Sector Growth (%) | 3.8% | 2.6% | 4.9% | 3.0% |
| Year | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| Core Sector Growth (%) | 4.8% | 4.3% | 4.4% | 0.4% |
| Year | 2020-21 | Apr-Dec FY22 | ||
| Core Sector Growth (%) | -6.4% | 12.6% |
The first 9 months of FY22 look impressive at +12.6%, but that is likely to gradually wane by Mar-22 as the base effect also wanes. In the remaining 3 months of FY22, core sector must grow over 6-7% to bring the core sector output back to Apr-2019 levels. That would still mean that core sector would just be back to where it was 3 years back.
For now it looks like the Omicron scare has been managed reasonably well. The bigger risk now is to handle the risks arising from a rise in inflation, Fed hawkishness and any populist signals from the Union Budget.
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- 03 January, 2022 |
- 5:23 AM
The final growth rate of the Index of Eight Core Industries for August 2021 is revised to 12.2% from its provisional level of 11.6%.
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