The output of eight core-sector industries inched up 0.9% in December, having recovered from a 1.3% contraction in November, which was its sharpest fall at least since the current series was introduced in April 2005, showed the official data released on Thursday. The growth rate for December, nevertheless, remained disappointing, as it was lower than even the average expansion of 1.9% during the April-December period of this fiscal from a year earlier. Still, analysts don’t expect the Reserve Bank of India to trim key policy rates when it meets on Tuesday to review the monetary policy, despite demand by industry.
Some analysts, however, added that the worst rainfall in Chennai in 100 years in late November and December halted operation at some of the units, affecting core infrastrcture sector output–albeit to a limited extent. Still, the latest data only reinforced fears about a fragile recovery in industrial output for December, after the index of industrial production (IIP) faced its sharpest fall since October 2011 in November, even though, according to the Nikkei India Manufacturing PMI, the country’s manufacturing sector growth hit a four-month high in January, as the flow of orders improved.
The subdued core infra sector growth in December was mainly caused by a plunge of 6.1% in the output of natural gas, the lowest since January 2015, followed by steel (-4.4%) and crude oil (-4.1%).