Growth in the output of the eight core infrastructure sectors unexpectedly slowed to 3.1% in November from a year earlier, compared with 8.4% in the previous month, reflecting the fragility of industrial recovery as the favourable base effect continued to wane.
Analysts attributed the slowdown to Diwali holidays, disruption in supplies from southern India following heavy rainfall, and weakening demand momentum once the peak festival season ended.
Data released by the industry ministry on Friday showed, against the pre-pandemic (same month in FY20) level, the growth in core sector output in November slowed to 1.9% from 7.8% in the previous month. The core sector had grown at a tepid pace of just 0.4% in FY20.
On a year-on-year basis, six of the eight core sectors witnessed a deceleration in growth in November from the previous month; cement production, in fact, contracted. Only fertiliser output grew at a faster pace (2.5% vs 0.04%) than in October, as winter crop sowing gathered pace. The eight core sectors have a 38% share in the index of industrial production (IIP). Between April and November, core sector growth touched 13.7%, against a pandemic-induced contraction of 11.1% a year before.
On a month-on-month basis, the index reading of all sectors, barring coal and refinery products, suggested a slowdown in November. The steepest fall was recorded in cement (21.1%) in November from the previous month.
Growth in the production of coal slowed to 8.2% in November from 14.7% in the previous month, while that of natural gas and refinery products dropped to 23.7% and 4.3% from 25.8% and 14.4%, respectively. Similarly, steel, cement and electricity growth stood at 0.8%, -3.2% and 1.5%, respectively, in November from 4.5%, 14.5% and 3.2% in October. Crude oil production in November dropped at the same rate as in the previous month: 2.2%.
Icra chief economist Aditi Nayar said, “With the considerable moderation in the core sector growth and the sequential decline in the GST e-way bills, we expect the IIP growth to flatten to under 2.5% in November 2021, in spite of the low base (-1.6% in November 2020).”