The Ministry of Commerce and Industry has released data indicating that the eight core sector industries experienced a growth of 5.5% in February 2020, marking the highest increase in 11 months.
A Surge in Growth of Key Sector Industries
The notable 5.5% increase can be attributed to a spike in refinery products, electricity, fertiliser, cement and coal production. Conversely, crude oil, natural gas, and steel underwent a period of negative growth rate in February. Despite this, it is important to note that this has been the fourth consecutive month where the index of these eight core industries has reported growth.
However, expectations for March 2020 do not hold the same optimism, largely due to the lockdown measures implemented to combat the spread of the Covid-19 virus. These lockdown measures have disrupted production processes both domestically and globally.
Breaking Down the Core Sectors
The Ministery classifies eight industries as core sectors. These comprise of coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity. These sectors collectively hold a weight of 40.27% in the Index of Industrial Production (IIP). The sectors, when ordered by their respective weightage from highest to lowest, are as follows: Refinery Products, Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilizers.
To provide further detail on the weightage each industry holds:
1. Petroleum & Refinery production – 28.04%
2. Electricity generation – 19.85%
3. Steel production – 17.92%
4. Coal production – 10.33%
5. Crude Oil production – 8.98%
6. Natural Gas production – 6.88%
7. Cement production – 5.37%
8. Fertilizers production – 2.63%
Understanding the Index of Industrial Production
The Index of Industrial Production (IIP) is an invaluable tool for understanding the growth of various sectors within an economy. The IIP incorporates a diverse array of industries, including mineral mining, electricity and manufacturing. The Central Statistical Organisation (CSO), under the Ministry of Statistics and Programme Implementation, compiles and publishes these statistics monthly, albeit with a lag of six weeks after the reference month ends.
In April 2017, the Base Year used in the calculation of the IIP for the Eight Core Industries was revised; shifting from the year 2004-05 to the year 2011-12. This decision has allowed the data presented to remain relevant and accurately reflective of current conditions.
It is this very data that has shown a significant growth for February 2020, highlighting the importance such indexes hold in demonstrating the health and progress of our economy.
