The eight core industries’ output growth rebounded to 2 per cent in September 2024 after recording a mild contraction of revised 1.6 per cent in August 2024.
The latest print was, however, substantially lower than 9.5 per cent growth recorded in September last year.
In the first half this fiscal, core industries output grew 4.2 per cent, lower than 8.2 per cent growth witnessed in same period last year, official data released by Commerce and Industry Ministry said on Wednesday.
The eight core industries — coal, natural gas, crude oil, refinery products, fertilizers, cement, steel and electricity — comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
Positive growth
Five of the eight core industries were in positive territory for the month under review. The sectors that showed positive growth in September are coal (2.6 per cent), refinery products (5.8 per cent), fertilizers (1.9 per cent), cement (7.1 per cent) and steel (1.5 per cent).
The three sectors that saw contraction in output were crude oil (-3.9 per cent), natural gas (-1.3 per cent) and electricity (-0.5 per cent).
Aditi Nayar, Chief Economist and Head - Research & Outreach, ICRA said that the easing of the disruption related to rainfall on sectors such as mining and electricity contributed to the turnaround in the core sector’s performance to a growth of 2 per cent in September 2024 from the mild contraction of 1.6 per cent in the previous month.
Notably, the growth in cement production improved to a 6-month high of 7.1 per cent in September 2024 from a contraction of 3 per cent in August 2024, aided by a favourable base. In contrast, steel output rose by just 1.5 per cent in the month, the slowest pace in 33 months.
Nayar said that ICRA projects the IIP to grow by 3-5 per cent in September, amid a narrower contraction in electricity and mining output, as well as a favorable base, and a sharp uptick in the growth of GST e-way bills (to 18.5 per cent in September from 12.9 per cent in August), supported by pre-festive stocking.
“With some shifts in the festive calendar, base effects are likely to obfuscate an analysis of how the economic growth momentum is unfolding over the next few months,” she added.
Subdued activity
Madan Sabnavis, Chief Economist, Bank of Baroda, said that growth in core sector has been weak in September due to subdued activity and base effects. Decline in electricity can be attributed to lower demand with monsoon retreat still not complete, he said.
“Higher cement production was due to preparation for resumption of construction post monsoon. Fertilizer production has been positive though low indicative of stocks being good. Also, a late withdrawal of monsoon pushes forward rabi sowing. As auto sector was subdued it got reflected in steel production. Petro products have done well due to more demand from export and domestic segments. Industrial growth to remain weak at around 1 per cent,” he added.
Anubhuti Sahay, Head, India Economic Research, Standard Chartered Bank, said the core sector data bounced back to positive territory after contracting in the previous month as impact of monsoon on coal mining, cement production and electricity generation faded.
“However, it’s still weak versus earlier part of the year. We expect better numbers from October onwards,” she added.
Meanwhile, the Centre has now revised the June core data growth to 5 per cent. In July this year, core industries had recorded 6.1 per cent growth.
Last month the government had pegged final growth rate for May at 6.9 per cent.