At 8.2%, Core Sectors’ Growth Hits 5-Month High In June

Relevance: GS3 - Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

(Source: The Hindu, 08/01/2023)

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Why in the news?

• According to data released by the Commerce and Industry Ministry recently, India's Core Sectors witnessed a remarkable 8.2% surge in output in June, marking the fastest pace in five months. 
• Seven out of the eight sectors which include Steel, Coal, Cement, Refinery Products, Natural Gas, Fertilizers, and Electricity reported an increase in production, while the production of Crude Oil declined during June 2023. 
• These core sectors account for 40.3% of the Index of Industrial Production (IIP). 

Key Highlights of Sector wise Performance in June 2023

Factors of the Growth

• This growth was largely driven by increased spending on infrastructure projects, particularly in the construction of roads. 
• Sectors like steel and cement experienced significant growth in the first quarter, even though they had already performed well the previous year.
• The delayed arrival of the monsoon season had a positive impact on certain sectors such as electricity and coal. 
• The dry weather in June boosted activities in mining and electricity generation, contributing to the overall growth.

What are Core Sectors?

• These are the most important sectors of the economy and constitute 40.3% of the weight of items included in the Index of Industrial Production (IIP).
• The Index of eight core industries (ICI) is prepared every month by the Office of the Economic Adviser (OEA), the Department for Promotion of Industry and Internal Trade (DPIIT), and the Ministry of Commerce & Industry.
• Core industries include eight sectors of the Indian economy that are mentioned below:
  • Coal: Coal production, excluding Coking coal.
  • Electricity: Electricity generation of thermal, nuclear, hydro, imports from Bhutan.
  • Crude Oil: Total crude oil production.
  • Cement: Production in large plants and mini plants.
  • Natural Gas: Total production of natural gas.
  • Steel: Production of alloy and non-alloy steel only.
  • Refinery Products: Total refinery production.
  • Fertilizer: Urea, ammonium sulfate, calcium ammonium nitrate, complex grade fertilizer, and single superphosphate, among others.

Significance of Core Industries

• The core industries play a crucial role in shaping the Indian economy and have a significant impact on various other sectors. 
• By measuring the physical volume of production in India, these industries provide essential insights into economic activities. Their analysis offers a more accurate and comprehensive understanding of the overall economic landscape.
• Government agencies rely on the progress of core industries to formulate effective policies that can stimulate economic growth and development. 
• Moreover, these industries are instrumental in calculating quarterly and advanced GDP estimates, making them essential indicators of the nation's economic health.
• Often referred to as infrastructure output, the core sector represents the foundational industries that form the backbone of the economy. 
• As such, their performance and growth directly influence the country's overall economic prosperity and industrial progress.

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FAQs

MCQ

Question: In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight? (UPSC 2015)

(a) Coal Production

(b) Electricity Generation

(c) Fertilizer Production

(d) Steel Production