India's ICI Index up at 9.4% in July; Production growth expected to gain momentum in 2021

Industrial production in the month of July witnessed a robust growth with easing Covid restrictions, along with pent-up demand, accelerated the output of India's eight major industries on a year-on-year basis.

The Index of Eight Core Industries (ICI) readings for the last month showed an expansion of 9.4 per cent from a decline of 7.6 per cent in output during the same month of the previous year. On a sequential basis, the core industrial growth during June stood at 9.3 per cent.

The ICI index comprises 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP). The IIP Index industries comprise coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.

"The combined Index of Eight Core Industries stood at 134 in July 2021, which increased by 9.4 per cent (provisional) as compared to the Index of July 2020," the Ministry of Commerce and Industry said in a statement. "The production of coal, natural gas, refinery products, fertilisers, steel, cement, and electricity industries increased in July 2021 over the corresponding period of last year."

As per the ministry, final growth rate of the ICI for April 2021 has been revised to 62.6 per cent from its provisional level of 56.1 per cent. The growth rate of ICI during April-July 2021-22 was 21.2 per cent (P) as compared to the corresponding period of 2020-21.

Sector-specific output

On a sector-specific basis, the output of coal, which has a weightage of 10.33 per cent in the index, showed growth of 18.7 per cent in July 2021 over the same month of the previous year.

Similarly, the output of refinery products, which has the highest weightage of 28.04 per cent, rose by 6.7 per cent, compared to the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85 per cent, rose by 9 per cent, whereas steel production was up 9.3 per cent last month.

However, the extraction of crude oil, which has an weightage of 8.98 per cent, declined by 3.2 per cent during the month under consideration, though the sub-index for natural gas output, with a weightage of 6.88 per cent, rose by 18.9 per cent.

Cement production, which has a weightage of 5.37 per cent, rose by 21.8 per cent in the month under review. Fertiliser manufacturing, which has the least weightage -- only 2.63 per cent -- grew by 0.5 per cent.

Core sector growth

"The core sector growth barely budged to 9.4 per cent in July 2021 from 9.3 per cent in June 2021, with an unfavourable base absorbing the positivity engendered by the further lifting of restrictions on economic activity and mobility," ICRA's Chief Economist Aditi Nayar said.

"On a disaggregated basis, half the sectors recorded an improved YoY growth in July 2021 (coal, electricity, refinery, cement), even as crude oil continued to contract."

"Based on the performance of the core sector, non-oil exports and auto production, we anticipate the IIP to record an expansion of 13-15 per cent in July 2021."

Highlights of data

India Ratings & Research's Chief Economist Devendra Kumar Pant said the July 2021 data points toward to some noteworthy highlights.

One is that the production levels of five core sector segments namely crude oil, natural gas, fertiliser, steel, and electricity are now higher than the production level of pre-Covid level (February 2020). "June 2021 saw only four core segments in the positive trajectory vis-a-vis the February 2020 production levels, namely crude oil, natural gas, fertilisers, and electricity."

Secondly, the latest data depicts that the overall index which on the back of Covid 2.0 had lost some ground in May and June 2021, crossed the two-year ago production levels in July 2021, he said and added, "This shows that the recovery post Covid 2.0 has been swifter than when the economy was hit with Covid 1.0."