Favorable base effect drives Core industry July, FY19 results; Steel and Electricity an exception

Impact: Positive (Power Generation); Positive (Construction and Steel)

Brief: The YTD data for most Core categories is encouraging as it doubles the print of same time last year. However, apart from Steel and Electricity sectors, all components are helped by a favorable base effect scenario.

The YTD print registered 5.8% growth in FY19 (Apr-July) as against 2.6% during the corresponding period, the previous year. In July, the core industries (overall) expanded by 6.6% as against 2.9% in July FY18. The key sectors that are driving the core sector growth are Cement (+15%), Coal (+12%), and Petroleum Refinery (+8%). Amongst these categories, Cement and Coal sector are the most consistent performers here despite being helped by a favorable base effect. In case of Cement, it is understood that construction activities have picked up and therefore, the industry is witnessing strong demand. Similarly, Coal industry also experiencing strong demand from the energy sector. Coal based thermal accounts for 58% in overall (installed capacity) energy generation.

The steel industry has been growing at 3.2% YTD primarily due to an unfavorable base effect. However, healthy demand emanating from construction and consumer durables has been positively impacting this sector - auguring better growth prospects in the near term. Also, the extension of anti-dumping duties on certain categories of Chinese imported steel - will add further impetus. Like Cement, the sector is therefore influenced by both the construction as well as consumer sectors. Continued growth in Electricity sector has impacted the growth in Coal sector since, as mentioned, a majority of Indian installed capacity is thermal (Coal) based. Even though domestic miners are having difficulty in supplying requisite amounts of the commodity to power generators (resulting in some Idle Capacity), thanks to an average growth of 5% of the Electricity sector- Coal production is averaging over 12% growth.

Core Coal Crude Natural Gas Petro refinery Fertilizer Steel Cement Electricity
Jul-17 2.9 0.6 -0.5 6.6 -2.7 0.2 9.4 1.0 6.6
Aug-17 4.4 15.4 -1.6 4.2 2.4 -0.6 2.2 0.7 8.3
Sep-17 4.7 10.4 0.1 6.3 8.1 -7.7 3.7 0.1 3.4
Oct-17 5.0 3.9 -0.4 2.8 7.5 3.0 8.6 -1.3 3.2
Nov-17 6.9 0.7 0.2 2.4 8.2 0.3 14.5 16.9 3.9
Dec-17 3.8 0.4 -2.1 1.1 6.6 3.0 0.4 17.7 4.4
Jan-18 6.2 3.8 -3.2 -1.2 11.0 -1.6 1.7 19.6 7.7
Feb-18 5.4 1.3 -2.4 -1.5 7.8 5.2 5.0 23.0 4.6
Mar-18 4.4 9.1 -1.6 0.9 1.1 3.2 4.7 13.0 6.0
Apr-18 4.7 16.0 -0.8 7.4 2.7 4.6 3.5 16.6 2.2
May-18 3.6 12.1 -2.9 -1.4 4.9 8.4 0.5 5.2 3.5
Jun-18 6.7 11.5 -3.4 -2.7 12.0 1.0 4.4 13.2 4.0
Jul-18 6.6 9.7 -5.4 -5.2 12.3 1.3 6.0 10.8 4.8
FY18YTD 2.6 -3.3 0.1 4.9 0.7 -0.9 7.0 -2.3 5.6
FY19YTD 5.8 12.3 -3.2 -1.1 8.0 3.7 3.2 14.7 4.8

Source: Ministry of Commerce and Industry

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