India’s core sectors continue to be a pivotal driver of economic growth, with the combined Index of Eight Core Industries (ECI) registering a robust 6.7% year-on-year growth in February 2024. The latest data underscores the resilience of the economy amidst ongoing infrastructure investments and highlights the diverse performance of key industries contributing to the core sector.

Strong growth trajectory:

According to the analysis by Acuite Ratings & Research, the 6.7% year-on-year growth in February marks a significant uptick from the revised figure of 4.1% recorded in January. This surge, attributed to the highest growth print in the last three months, reflects a positive trend despite facing a less favourable base of 7.4% year-on-year growth in February 2023.

In the eleven month period of Apr 2023 – Feb 2024, the core output growth has been strong at 7.7% YoY and reflects the positive impact of the step up in public investments in infrastructure.

Key contributors to growth:

Several core sectors witnessed notable growth during the April 2023 – February 2024 period, with coal production leading the pack at an impressive 11.6% year-on-year increase. Cement and steel production also showed robust growth, buoyed by strong demand from the infrastructure sector.

Sector-wise analysis:

Coal Production: A surge in domestic coal production contributed to a reduction in coal imports, supporting a remarkable 12.2% cumulative growth in coal dispatches.
Cement Production: Strong demand from infrastructure projects fuelled a 10.2% year-on-year growth in cement production in February.
Steel Production: Buoyant demand from the infrastructure sector drove an 8.5% year-on-year growth in steel production, making it the highest growth sector in the current fiscal.
Natural Gas Production: A focus on cleaner fuels led to an 11.2% year-on-year growth in natural gas production, reflecting steady demand and increased exploration activities.
Fertiliser Production: Despite a 9.5% year-on-year decline in February, fertiliser production witnessed a cumulative growth of 4.1% year-on-year, supported by government initiatives amidst challenges like El Nino and rainfall deficiency.

While sectors like petroleum refinery and crude oil production experienced modest growth, challenges such as volatility in exports and crude oil prices persisted. However, the electricity generation sector remained resilient, recording a 6.3% year-on-year growth in February, supported by warmer weather conditions.

Suman Chowdhury, Chief Economist and Head of Research, commented on the sector’s performance, emphasising its critical role in India’s growth story. Despite economic disruptions, the core sector has maintained an average growth of 4.4% during the Covid and post-Covid period, indicating its resilience and potential as a key driver of the economy. “In the current fiscal, the estimated growth is likely to be over 7.0% in line with the NSO GDP growth estimates of 7.6% for FY24. Clearly, the core sector along with the manufacturing sector is expected to be one of the key drivers of the economy over the medium term.” he added.