India’s core sector, which includes industries like cement, coal, crude oil, electricity, fertilizers, natural gas, refinery products, and steel, expanded at a rate of 3.6% in January, its slowest pace in 15 months, according to government data. The growth was affected by a high base and mixed performance across sectors.
The core sector had grown by 4.9% in the previous month and 9.7% in the same period last year.
Rajani Sinha, chief economist at CareEdge, said, “Core sector output slowed to a 15-month low of 3.6% in January owing to a slightly unfavourable base. This also follows an upwardly revised 4.9% growth in the previous month.”
Sequentially, the growth rate slowed to 2.2% in January from 7% in the previous month.
The slow growth in the eight core industries – cement, coal, crude oil, electricity, fertilizers, natural gas, refinery products, and steel – is expected to be reflected in industrial output as well. These sectors have a weight of over 40% in the Index of Industrial Production (IIP).
Madan Sabnavis, chief economist at Bank of Baroda, predicted industrial output growth to be around 2-3% this month. He also mentioned that there wouldn’t be any resurgence in consumer goods production, leading to muted growth.
In January, the growth in three of the eight industries slowed down, while two contracted. In the first ten months of FY24, the core industry growth was 7.7%, compared to 8.3% in the same period of FY23.
Coal maintained double-digit growth of 10.2% for the seventh consecutive month in January, but it eased from 10.7% in the previous month. On the other hand, electricity production gathered pace, growing at a rate of 5.2% compared to 1.2% in December. The demand for heating during the severe January winter contributed to the increased demand for power from both businesses and households, according to Sabnavis.
Cement performance showed improvement, rising to a three-month high of 5.6% in January from 3.8% earlier.
The slowdown in core sector growth has implications for the overall economic growth of the country. Experts believe that the impact of this slowdown will be seen in the industrial output and industrial production numbers for the coming months.
