October fuel consumption data exhibits PM Modi's reforms effect

India's consumption of domestic and industrial fuels - including petrol, diesel, cooking gas, kerosene, naphtha and others - grew at a massive 17.8 per cent in October, the highest monthly growth rate witnessed in at least the past five years - a reason to be optimistic as it is a valid economic activity indicator.

This growth level has not been achieved in the period since April 2010 for which data is publicly available.

Consumption of petroleum products rose 17.8 per cent to 15.2 million tonne (MT) in October 2015 from 12.9 MT in the same month last fiscal, according to fresh data released by Petroleum Planning and Analysis Cell (PPAC), the oil ministry's technical arm.

It was led by a 16.3 per cent growth in diesel, which alone accounts for 41 per cent of the fuel basket, followed by 14.5 per cent growth in petrol and 12.5 per cent jump in cooking gas usage.

The latest numbers on consumption of petroleum products are attributed to both one-off factors and a larger trend of a pick-up in economic activity.

These factors include higher growth, low product prices, a rise in the demand for fuel due to the festival season and Bihar elections, increased automobile sales, deficient rainfall pushing use of diesel generator sets for irrigation, start of mining activity in Chhattisgarh and initiation of road projects on National and State Highways.

In a scenario of economic recovery, one would see more consumption of petroleum products as the Indian industry is energy intensive.

This is one of the first lucid indicators that clearly exhibits that albeit at a slow pace but surely at a steady pace, the effects of reforms ushered in by the Modi government are getting visible.

To be noted is that data is in terms of volume and not value, as that would have shrouded the above conclusion because of crashing of crude oil prices in the past one year.

(The author is an investment strategist)