India’s eight core industries’ growth fell to a four-month low of 8.1% in September from a 14-month high of 12.5% in August, primarily due to a sharp decline in the growth in production of electricity, crude oil and refinery products, according to data released by the government on Tuesday.
Sequentially, the production of eight-core sectors fell 4.8% in September, the steepest decline in five months.
Experts expect the September’s Index of Industrial Production (IIP) to also print in single digits given the core sector output. The eight core industries comprise about 40% of the IIP.
Typically, core sector production in September reduces as compared to August – but a 4.8% decline is the second highest recorded in the last 11 years. In September 2019, the core sector’s output had fallen 6.1% month-on-month.
In September, rainfall in India was 13% above the benchmark, and the rains have contributed to slowing of activity in many core industries except fertilisers.
However, among the seven of the eight core sectors – which recorded a slowdown in output growth in September as compared to August – only crude oil production observed a year-on-year contraction of 0.4% during the month. Crude oil production reverted to a contraction after a gap of two months in September.
The production of electricity ebbed to 9.3% in September from 15.3% in August, and that of refinery products eased to 5.5% from 9.5%. Coal sector’s output declined to 16.1% from 17.9% during the period and cement’s output crashed to 4.7% from 19.3%.
In the first half of the current fiscal year, the core sector’s production growth stood at 7.8% as compared to 9.8% in the corresponding period of last year. The decline in electricity, coal and refinery products’ production dragged down the overall core sector’s growth in H1.
“That said, overall, the indicators suggest that investment activity is reviving as domestic energy consumption remains buoyant,” said Anitha Rangan, economist, Equirus Securities. “The core growth suggests that domestic growth recovery continues.”