Solid and stable: the primary sector grew by 6.3% in May.

Thanks to strong performances by the electricity, coal and natural gas generation sectors, production growth in the country’s eight key industries in May 2024 was 6.3%, up from 5.2% in the same month last year. This is the fourth consecutive month in which production in key industries has been at least 6%.

However, the latest readings were lower than April 2024’s upwardly revised output growth of 6.7%. Before the latest adjustment, the April 2024 reading was set at 6.2%.

According to data published by the Ministry of Trade and Industry, the upward revision of steel production to 8.8 percent. and electricity generation to 10.2 percent. led to an increase in the overall growth rate in April 2024.

According to official data released on Friday, in April-May 2024, the output of major industries was 6.5 percent, much higher than 4.9 percent. in the same period last year.

A month under review

In the month under review, apart from crude oil (-1.1%), fertilizers (-1.7%) and cement (-0.8%), all five remaining sectors recorded positive growth.

While the coal sector grew by 10.2% (7.2% in May 2023), electricity generation recorded a solid growth of 12.8% (0.8% in May 2023).

Natural gas production increased by 7.5 percent (-0.3 percent). Production of refined products increased modestly by 0.5%. (2.8%). Steel sector production was a solid 7.6%. (12% in May 2023).

Eight major industries—coal, natural gas, crude oil, refined products, fertilizers, cement, steel, and electricity—account for 40.27 percent of the weight of items included in the Index of Industrial Production (IIP).

The government has revised upwards its forecast for production growth in eight major industries for February 2024 to 7.1%.

Last month, the reading for January 2024 was revised upwards to 4.1 per cent. Earlier, the reading for December 2023 was revised upwards to 5 per cent. Earlier, the government had revised upwards the growth of major industries in November 2023 to 7.9 per cent. The monthly readings for September 2023 and October 2023 were also revised upwards in the earlier months.

EXPERTS’ VIEWS

Aditi Nayar, Chief Economist, Head of Research & Outreach at ICRA Ltd, said growth in the primary sector slowed to 6.3% in May 2024 from 6.7% in the previous month, which was accounted for by all sectors except power and coal.

“A combination of factors, including a heat wave in parts of the country and phased general elections, may have limited activity and enforcement in some sectors. At the same time, the heatwave increased energy demand, resulting in increased coal and electricity growth in May 2024 compared to the previous month. We expect IIP growth to be 4-5 percent in May 2024,” she added.

Madan Sabnavis, chief economist at Bank of Baroda, said the base effect did indeed support segments that performed well.

He added that the 12.8% growth in the power sector was mainly due to the heat wave, which led to higher demand.

Higher energy production also led to higher growth in mining, along with increased coal output. Sabnavis said the 7.6 percent rise in steel prices was supported by both government spending and the auto sector.

Cement production fell -0.8 percent due to strong double-digit base effects from last year. The government’s slowdown in capex in May impacted some cement projects.

Fertilizer production declined by 1.7 per cent, which can be attributed to insufficient stocks for sale during the kharif season.

Crude oil and refined products recorded low and negative growth, mainly due to lower demand for diesel fuel, he added.