The eight core industries’ output growth eased to a 14-month low of 3.8% in December from 7.9% in November, on account of the statistical effect of a high base, data released by the commerce ministry showed on Wednesday. In December 2022, the core sector’s output had grown 8.3%.
On a month-on-month basis, the core sector’s output rose 5.9% in December, slightly higher than the 5.8% sequential growth recorded between the two months in the last 12 years. Among the eight sectors, the output growth of six eased from the levels recorded in November, but that was due to high base as sequentially, all the sectors witnessed an increase in production during December.
India Ratings and Research, in a note, said that the growth in sectors such as coal (10.6%), natural gas (6.6%), fertilisers (5.8%) and steel (5.9%) provided support to the infrastructure industries index, in December.
“The combined capital outlay of the union and 15 states grew 79.8% to Rs 1.06 trillion in December. The phenomenal support from government capex is providing much needed impetus to the infrastructure sector,” it said.
In April-December, the Centre spent Rs 6.74 trillion in capital expenditure, accounting for 67% of the Budget estimate (BE) of Rs 10 trillion in FY24. During the same period of last fiscal, the Centre’s capex stood at Rs 4.90 trillion, 65% of the BE.
Collectively, in the first nine months of FY24, the core sector growth averaged 8.1%, flat as compared to April-December FY23. Refinery products output growth – which carries the highest weight of 28% in the core basket – stood at 4.7% during the period, lower than 5.5% last year.
Coal and electricity production growth during April-December came in at 12.5% and 6.9%, respectively, which is lower than 16.5% and 9.9% recorded during the corresponding period of last year. Steel and natural gas’ output, however, witnessed 13.3% and 5.6% growth during the period as against 7.9% and 0.9% growth last year.
Going forward, economists believe the core sector growth would remain muted in the near term largely due to a high base effect. In December, most economists expect the Index of Industrial Production (IIP) to grow only 1-2% due to tepid core sector growth – which accounts for about 40% of the IIP.