India's core sector growth touches 4-month low: Here's why
In September, India's eight core industries saw an 8.1% growth rate YoY, marking the lowest increase in four months, as reported by the Ministry of Commerce and Industry. This growth in India's core infrastructure output includes coal, crude oil, steel, cement, electricity, fertilizers, refinery products, and natural gas. It is a decrease from August's 12.1% rate, which has since been adjusted to 12.5%. To note, September 2022 saw a core sector growth of 8.3%.
Cement sector causes a drop in growth
The primary cause for the decline in core sector growth during September was the cement industry, which only saw a 4.7% increase in output, the lowest in half a year, following a significant 19.3% surge in August. Among the eight industries, all but one experienced lower output growth rates, with crude oil production witnessing a 0.4% year-on-year decrease. Aditi Nayar, Chief Economist at ICRA, stated, "A pickup in rainfall expectedly flattened the core sector expansion in September."
Only fertilizer industry reported improvement in September
Fertilizer production was the sole industry to report improved numbers in September, with a growth rate of 4.2% compared to August's 1.8%. Electricity generation increased by 9.3%, coal production rose by 16.1%, and the steel sector saw a 9.6% growth. However, government data revealed a slight 0.4% decline in crude oil production. For April-September, the core sector reported growth of 7.8% as opposed to 9.8% in the first half of 2022-23.
India's IIP growth reached 14-month high in August
As core sector growth significantly dropped in September compared to August, it is likely that industrial growth, based on the Index of Industrial Production (IIP) will also see a decrease. The eight core industries account for over 40% of the IIP's weight. On October 12, the Centre released data showing India's IIP growth reaching a 14-month high of 10.3% in August, surpassing the anticipated 9.1%. The IIP growth figures for September will be released on November 10.
