Eight core infrastructure industries grew 5.4% in November from a year earlier, having recovered from their worst performance in 20 months in the previous month, according to industry ministry data released on Friday. Fewer holidays from a year before (Diwali fell in November last year) and the waning effect of an unfavourable base propped up growth. The core sectors had grown just 0.9% (revised) on year in October.
The recovery in November, however, remained rather uneven. While four sectors — cement, coal, electricity and steel — witnessed robust growth in the range of 12.1% to 28.6%, three sectors — crude oil, natural gas and refinery products — shrank by up to 9.3%. Fertiliser grew 6.4% in November, against 5.4% in the previous month, thanks to a pick-up in rabi sowing.
Of course, on a month-on-month, seasonally-adjusted basis, the core sector growth turned positive in November (after negative growth in October) and remained 1% higher than the October level, according to India Ratings principal economist Sunil Kumar Sinha.
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Given that these core sectors have a combined weight of 40.3% in the index of industrial production (IIP), the IIP will recover sharply in November from its worst contraction in 26 months in October.
Icra chief economist Aditi Nayar said the IIP will likely grow at 3-4% in November, against a 4% contraction in the previous month. But its performance may trail that of the core industries, given the drag imposed by weaker exports, she added.
India Ratings’ Sinha expected core sector growth to slightly ease to 5% in December (on a slightly higher base). “(However) power generation has shown a robust growth of 13.3% till 29 December 2022 over the same period last year. The steel and cement sectors are expected to register good year-on-year growth in the near term on the back of sustained capex support from both the state and the union government,” he added.
Between April and November, the core sector recorded a growth rate of 8% from a year before, aided by a favourable base effect and decent performances in some of the months earlier this fiscal.
The recovery in core sector output in November was driven by a 28.6% jump in cement, a 15-month high. Growth in coal and electricity output hit their highest in five months at 12.3% and 12.1%, respectively, while steel production growth scaled a six-month peak of 10.8%.
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The capex push in recent months, especially by the Central government, has helped the production of steel, analysts have said. Also, the recent government move to scrap the export duty on select steel products could boost the production of the metal.
However, the production of refinery products in November shrank 9.3%, the worst in 21 months. The output of crude oil and natural gas contracted 1.1% and 0.7%, respectively, in November, against a drop of 2.2% and 4.2% in the previous month.