CORE SECTOR (Syllabus: GS Paper 3 - Economy

News-CRUX-10     1st August 2023        

Context: Output of eight key infrastructure sectors-known as the core sector-expanded to a five month high of 8.2 percent in June.

  • This is due to a high base effect and positive growth in seven of the eight sectors.
  • Data released by the Ministry of Commerce and Industry showed that while growth in the output of fertiliser (3.4 per cent) and cement (9.4 per cent) slowed than the previous month, that of coal (9.8 per cent), refinery products (4.6 per cent), steel (21.9 per cent), and electricity (3.3 per cent) accelerated in June.

Core Sector

  • About: Core sectors of an economy are  the key industries in the economy.
  • 8 Core Sectors of the Indian Economy: Coal, Crude Oil, Natural Gas, Refinery Products, Fertiliser, Steel, Cement, Electricity.
  • Weight in IIP: These eight industries have a combined share of above 40.27% in the Index of Industrial Production (IIP).
    • Decreasing order of their weightage: Refinery Products (28.04) > Electricity (19.85) > Steel (17.92) > Coal (10.33) > Crude Oil (8.98) > Natural Gas (6.88) > Cement (5.37) > Fertilizers (2.63).
  • Index of Eight Core Industries (ICI): The ICI is a production volume index prepared and released by the Office of the Economic Adviser (OEA), Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry, GOI.
    • It is released every month. 
    • The index is calculated by using the Laspeyres formula of the weighted arithmetic mean of quantity relatives.
      • The Laspeyres Index is calculated by working out the cost of a group of commodities at current prices, dividing this by the cost of the same group of commodities at base period prices, and then multiplying by 100.
    • It measures the individual and collective performances of the production in these eight core industries.
    • It is used by policymakers including the Ministry of Finance, other Ministries, and Departments.
    • It is also used by banks for financing infrastructure projects and the Reserve Bank of India (RBI).
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