The recent data released by the government indicates a decline in output growth of eight core industries for the second consecutive month, slipping to 2.6% in December 2018. The definition of “core industry” refers to a central or principal industry that exercises a multiplier effect on the economy. Such an industry typically serves as the backbone to all other sectors in most nations. To put it into perspective, The Eight Core Industries makeup 40.27% of the weightage of items incorporated in the Index of Industrial Production (IIP).
Understanding Core Industries and their Impact
A core industry is integral to the economy due to its multiplier effect. This industry fuels growth in various sectors, facilitating economic growth. Their influence is so significant that these eight core industries amount to more than 40% of the weights of the items involved in the Index of Industrial Production.
About Index of Industrial Production
The Index of Industrial Production (IIP) is a valuable tool that elaborates on the growth and development of diverse sectors within an economy, such as mineral mining, electricity generation, and manufacturing among others. The Central Statistical Organisation (CSO), operating under the Ministry of Statistics and Programme Implementation, compiles and publishes the IIP report on a monthly basis. The publication typically occurs six weeks following the end of the reference month, hence a lag of six weeks. The Base Year of the Index of Eight Core Industries was revised from the year 2004-05 to 2011-12 in April 2017.
Composition of Eight Core Industries
The eight core industries are ranked in descending order based on their weightage. This begins with Refinery Products, followed by Electricity, Steel, Coal, Crude Oil, Natural Gas, Cement, and Fertilizers. In July 2018, a report by V.K Saraswat, a member of NITI Aayog, proposed that the government consider recognizing the aluminium sector as India’s ninth core industry.
| Industry | Weight (In percentage) |
|---|---|
| Petroleum & Refinery Production | 28.04 |
| Electricity Generation | 19.85 |
| Steel Production | 17.92 |
| Coal Production | 10.33 |
| Crude Oil production | 8.98 |
| Natural Gas Production | 6.88 |
| Cement Production | 5.37 |
| Fertilizers Production | 2.63 |
Outlook on the Future of Core Industries in India
Despite the recent decline in growth output for two straight months, these industries remain pivotal to India’s economic structure. It’s important to note the proposal of incorporating the aluminium sector as the ninth core industry, marking potential for expansion and diversification in the sector. This could potentially enhance the industry’s contribution to the IIP and bolster overall economic growth.