New Delhi: India’s core sector output growth hit a six-month low of 7.8% in November, easing from 12% in the previous month, as a high base effect weighed on growth. It’s up 10% in the April-October period from a year earlier, but economists expect subdued growth in the rest of FY24 because of the base effect of high growth last year.
“The positive aspect was the sharp uptick seen in the output of petroleum and refinery products, which is reflective of healthy economic activity,” said Rajani Sinha, chief economist, CareEdge.
Refinery products grew at a 17-month high of 12.4% compared with 4.2% in October.
The Index of Eight Core Industries measures the output of key infrastructure segments – coal, natural gas, petroleum refining, fertilisers, crude, electricity, cement, and steel – and accounts for 40% of the Index of Industrial Production (IIP). The lower core sector growth should dent industrial growth.
Aditi Nayar, chief economist, Icra, contended that IIP is likely to dip to 2-4% in November. “Given the larger number of factory holidays, we anticipate a modest 2-4% rise in the IIP in November 2023,” Nayar said.
Industrial output had jumped to a 16-month high of 11.7% in October.
The Indian economy registered 7.7% growth in the first half of the fiscal year. The Reserve Bank of India (RBI) expects it to ease to 6.5% in the third quarter and 6% in the last quarter for a full-year GDP growth of 7%.
Mixed Performance
While coal and refinery products maintained double-digit growth in November, two of the eight sectors – cement and crude – contracted in November.
Cement contracted 3.6% after 17.4% growth the previous month, hitting its lowest in 13 months. November also marked the first contraction for the industry in eight months. “The high base effect has come in the way of cement production, which has turned negative. The slowdown in housing is also a factor here,” said Madan Sabnavis, chief economist at the Bank of Baroda.
Electricity growth also eased considerably to 5.6% from 20.3% in the previous month. Coal output increased 10.9%, whereas steel maintained 9.1% growth.
