Home / Economy / Output in 8 core sectors shrinks for a 2nd month
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Output in eight infrastructure sectors contracted sequentially for the second consecutive month by 5% in September, even as the fading effect of a low base meant year-on-year growth eased to 4.4% during the month.

Data released by the industry department showed that except crude oil (-1.7%), all other infra sectors such as coal (8.1%), cement (10.8%), steel (3%) recorded positive growth from a year earlier. Core sectors contribute two-fifth to the index of industrial production, data for which will be released on 12 November.

Separately, data released by the Controller General of Accounts showed government exhausted only 35% of its full-year fiscal deficit target in the first six months of the year till September, the lowest in 11 years, due to robust growth in tax revenue. India Ratings chief economist Devendra Kumar Pant said he believes the fiscal deficit for FY22 will be lower at 6.6% of GDP than the budgeted 6.8%.

ICRA Ltd chief economist Aditi Nayar said lower core sector growth and the impact of semiconductor shortages on auto output are expected to dampen the September IIP growth to 3-5%, despite the pre-festive season inventory build-up suggested by the GST e-way bill data. “The sequential momentum expectedly recorded a broad-based slowdown with an MoM dip of 5% in September 2021, reflecting the impact of heavy rains on certain core sectors. On an encouraging note, core output in September 2021 exceeded the pre-covid level of September 2019 by 5%, led by coal, natural gas, steel, cement and electricity," she added.

The rating agency earlier this month said the performance of 14 of the 15 high-frequency indicators except non-food bank credit worsened in September compared to August, adding that the economy is likely to grow at 7.7% in the September quarter as seven of the indicators recovered to above their pre-pandemic level during the second quarter of FY22.

Fitch Ratings earlier this month slashed its FY22 growth forecast for India to 8.7% from 10% estimated in June, anticipating that the severe impact of the second wave of the pandemic would delay economic recovery. The World Bank and Moody’s have projected the Indian economy to grow at 8.3% and 9.3%, respectively.

Mixed Bag
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Mixed Bag

With rainfall exceeding the long-period average by 35% in September 2021, the growth in coal output eased to 8% in September from 20.5% in August. “We expect the coal availability to power plants to improve gradually during October with an expected ramp-up in both coal production and dispatch levels, as well as a mild rise in imports," Nayar said.

Care Ratings said the surprise high growth in coal output on top of 21% growth last year means that the shortage that was witnessed in October was more due to inventory management than production.

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