InvestorQ : What were the major highlights of the core sector number released by the government for the Jan-21 month?
Khushi Patel made post

What were the major highlights of the core sector number released by the government for the Jan-21 month?

Dhwani Mehta answered.
1 year ago

On 26 February, the Economic Affairs Department released the core sector numbers for Jan-21. Core sector is a combination of 8 core infrastructure sectors that constitute nearly 40.27% of the total IIP. Here are the highlights of the core sector numbers.

· Core sector index, which measures output of 8 core infrastructure segments, rose by 0.1% for the month of January 2021. While recovery is visible, it continues to be wobbly even as five out of the eight core infrastructure sectors showed negative growth. The only good news is that the core sector has not fallen below -1.4% in the last 5 months and has been in positive territory for 3 out of the last 5 months.

· On a sequential basis, growth in core sector output in January 2021 was lower than the 0.2% expansion in December 2020. However, the December index is a revised estimate, up from a contraction figure of -0.3% earlier. That gives hope that even the current month could see a positive upgrade. In fact, the October 2020 figure also got upgraded by 200 basis points from -2.5% to just about -0.5%.

· Core sector index has a 40.27% weightage in the Index of Industrial Production or IIP. Essentially, the core sector captures growth in output in 8 infrastructure industries including coal, electricity, crude oil, natural gas, steel, cement, fertilizers, and refinery products. For the month of January 2021, electricity, steel and fertilizers were showing positive growth while the other five sectors showed negative growth.

· Core sector index gained from the fertilizer, steel, and electricity sectors; which saw output expansion to the tune of 2.7%, 2.6%, and 5.1% respectively. The other five sectors that saw output contraction in Jan-21 included coal sector at 1.8%, crude oil by 4.6%, natural gas by 2%, refinery products by 2.6% and cement by 5.9%. While coal contracted due to base effect, cement took a hit on account of weak activity in housing and commercial construction.

For the first 10 months of FY21, index of eight core sectors contracted by -8.8%, as compared with +0.8% expansion in the first 10 months of FY20. This is likely to induce the Monetary Policy Committee of the RBI to maintain its accommodative stance ahead.