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Jan. core sector growth slows to 15-month low but output at 10-month high

Finished products at IISCO steel plant, Burnpur in West Bengal.
| Photo Credit: KAMAL NARANG

Output growth in India’s eight core sectors dropped to a 15-month low of 3.6% this January, driven by a contraction in fertiliser and refinery production along with base effects from 2023 when the core sectors had grown 9.7% in the same month.

However, in absolute terms, overall output levels were at a ten-month high, with production rising sequentially for the second straight month and 2.2% above the December 2023 levels. Fertilisers production shrank 0.6% in January, the first decline recorded since February 2022.

The Commerce and Industry Ministry, which released the data on Thursday, also upgraded the growth rate for December 2023 to 4.9% from the 14-month low of 3.8% estimated earlier. The Index of Core Industries (ICI) constitutes a little over 40% of the Index of Industrial Production (IIP).

While refinery products, with a 28% weightage in the ICI, dropped 4.3% in January, marking their first contraction in nine months, electricity generation with a 20% weightage, recovered from a mere 1.2% uptick in December to rise 5.2% in January.

Coal output growth slowed slightly to 10.2%, but still clocked the seventh straight month of double-digit growth. Crude oil production broke a two-month streak of contractions to register a minor 0.7% growth in January.

“With a relatively healthier trend displayed by various other high frequency indicators, we project the IIP to report a growth of 2%-4% in January,” reckoned ICRA chief economist Aditi Nayar, noting that only crude oil, cement and electricity output showed an improved year-on-year performance in January compared to December 2023.

While the overall core sectors’ performance was a mixed bag in view of the low 3.6% uptick, the good part is that cement and steel, which are reflective of capital expenditure, witnessed a fairly good growth of 7% and 5.6% respectively despite high base effects, said Bank of Baroda chief economist Madan Sabnavis.

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