The impact of the roll out of the Goods and Services Tax and demonetisation may finally be wearing off, with the index of eight core industries expanding at its fastest pace so far this fiscal.
The eight core industries grew by 5.2 per cent in September this year led by a sharp expansion in coal and refinery production, according to official data released on Tuesday.
The last time core sector growth peaked was in March 2017, when it expanded by a similar 5.2 per cent.
The eight core industries grew by 5.3 per cent in September last year. For August 2017, the growth was revised down to 4.4 per cent from the previous 4.9 per cent.
The data could also indicate a revival in industrial output as well as the eight core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production.
But, on a cumulative basis the eight core industries expanded by just 3.3 per cent between April and September 2017 as against 5.4 per cent in the corresponding period a year ago.
In September this year, the sharpest increase was registered in coal production that grew by 10.6 per cent as against 15.3 per cent in August. Refinery products grew by 8.1 per cent while natural gas grew by 6.3 per cent.
Fertiliser production was the only sector that declined in September and contracted by 7.7 per cent as against a 0.7 per cent dip in August. Analysts pointed out that the core sector output has been on a rising trend since July, which is encouraging but said that the economy may not be fully out of the woods.
Pain points “Slower growth of cement and steel sector raises a concern on infrastructure sector growth outlook.
“The high base in October 2016 is likely to pull down growth a bit in October 2017,” said DK Pant, Chief Economist, India Ratings & Research, adding that restocking after destocking due to GST and festival demand is expected to give a push to IIP growth in September.
IIP grew by a nine-month high of 4.3 per cent in August.
“The sequential pick-up in core sector growth and inventory build-up prior to the festival season, may narrowly offset the fading impact of post-GST restocking and an unfavourable base effect on IIP growth in September,” said Aditi Nayar, Vice-President, ICRA.
The next monetary policy review is on December 6 and analysts expect the Reserve Bank of India to cut rates to boost growth.