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[Sansad TV Archive] Indian Economy: Growth in Core Sectors

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Context

  • For the second month in a row, output from India’s eight core sectors has shown acceleration.
  • It rose by 11.6%, in August, compared to a 6.9% contraction a year ago.
  • Although crude oil and fertiliser output has declined, 4 out of 8 core sectors registered strong double-digit growth according to the Index of Eight Core Industries released by DPIIT.

Growth in Core Industries

  • The ICI measures the combined and individual production in 8 core industries that include Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.
  • These 8 Core Industries make up 40.27 per cent weight of the items included in the IIP or the Index of Industrial Production.
  • The August output of ICI was 3.9% higher than pre-COVID levels, compared to July that recorded a 1.1% uptick above 2019 levels.
  • Cement production jumped 36% compared to a 14.5% contraction in August 2020, while coal and natural gas registered a 20.6% surge.

What are the Core Industries in India?

  • The main or the key industries constitute the core sectors of an economy.
  • In India, there are eight sectors that are considered the core sectors.
  • They are electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers.

Index of Eight Core Industries (ICI) vs Index of Industrial Production (IIP)

[A] Index of Eight Core Industries

  • The monthly Index of Eight Core Industries (ICI) is a production volume index.
  • ICI measures collective and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.
  • Prior to the 2004-05 series six core industries namely Coal, Cement, Finished Steel, Electricity, Crude petroleum and Refinery products constituted the index basket.
  • Two more industries i.e. Fertilizer and Natural Gas were added to the index basket in 2004-05 series. The ICI series with base 2011-12 will continue to have eight core industries.

Components covered in these eight industries for the purpose of compilation of index are as follows:

  • Coal – Coal Production excluding Coking coal.
  • Crude Oil – Total Crude Oil Production.
  • Natural Gas – Total Natural Gas Production.
  • Refinery Products – Total Refinery Production (in terms of Crude Throughput).
  • Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).
  • Steel – Production of Alloy and Non-Alloy Steel only.
  • Cement – Production of Large Plants and Mini Plants.
  • Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.

[B] Index of Industrial Production

  • The Index of Industrial Production (IIP) is an index for India which details out the growth of various sectors in an economy such as mineral mining, electricity and manufacturing.
  • The all India IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period.

Difference between the two

  • IIP is compiled and published monthly by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends.
  • However, ICI is compiled and released by Office of the Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), and Ministry of Commerce & Industry.
  • The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP).
  • These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.

Importance of Core Industries

  • The core sectors have a major impact on the Indian economy and significantly affect most other industries as well.
  • Their measures help account the physical volume of production in India.
  • Their analysis offers clearer and realistic assessment of what’s happening in the economy
  • Their progress is used by government agencies for policy-making purposes.
  • They remain extremely relevant for the calculation of the quarterly and advance Gross Domestic Product (GDP) estimates.
  • The core sector is also known as Infrastructure output as they represent the basic industries that form the base of the economy.

Do you know about the Strategic Sectors?

The government has identified four strategic sectors where the presence of state-run companies will be reduced to a minimum.

  1. Atomic energy, space and defence
  2. Transport and telecommunications
  3. Power, petroleum, coal and other minerals and
  4. Banking, insurance and financial services
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