Production levels in India’s eight core sectors, which account for about 40% of the country’s industrial output, continued to decline in September. | Photo credit: REUTERS
Production levels in India’s eight core industries, which account for around 40% of the country’s industrial output, continued to decline in September, with the Index of Core Industries (ICI) falling to a ten-month low of 154.8 . That’s 0.83% below the index’s August level.
However, on an annual basis, output from core industries recorded a 2% increase, reflecting a moderate but positive turnaround from August, when the index had shrunk 1.6%, the first such contraction in 36 months.
Steel down, cement up
The outlook for the two main construction-related sectors was mixed, with steel production growth hitting a 33-month low of 1.5% in September, while cement production rose 7.1%, the fastest in six months.
Noting that steel production may have been affected by the auto sector’s sales woes, Bank of Baroda chief economist Madan Sabnavis thought industrial production could remain weak in September, with a growth rate of less than 1%.
The Industrial Production Index (IIP) shrank marginally in August, the first time since October 2022. The National Bureau of Statistics will release the September IIP figures on November 12.
Suman Chowdhury, chief economist at Acuité Ratings, expects core sectors to grow 4.5% to 5% between 2024 and 2025, up from 7.6% last year, and says this will also drown industrial output growth to 5% . Economic indicators for the second quarter have increased downside risks to their 7% growth projection for the year, he noted.
Electricity, oil and gas
Five of the eight infrastructure sectors recorded year-on-year growth, compared to just two sectors in August. However, production levels of only three sectors were also higher than in August: coal (+9.8%), cement (0.85%) and refinery products, which recorded a fractional increase of 0.07% sequentially.
Electricity generation contracted for the second month in a row, albeit with a milder contraction of 0.5% from September 2023. However, this was 3.5% below August generation levels, which may reflect the late withdrawal of the monsoon with above-normal rainfall in September.
Crude oil production shrank for the fifth straight month, with the contraction deepening to 3.9%, while natural gas production fell 1.3%, the third straight month of contraction. Absolute production levels in both sectors were at their lowest level in three months.
Fertilizer production growth reached a four-month low of 1.9%, with volumes at their lowest since July. Mr Sabnavis linked this to adequate supplies and the late monsoon which helped Rabi sow ahead.
ICRA chief economist Aditi Nayar estimated that industrial output grew 3% to 5% in September, driven by smaller contractions in power and mining output, higher growth in GST e-way bills and a favorable base from last year.
Published – Oct 30, 2024 9:00 PM IST
