India's core sector growth hits four-month high of 4.3% in November

The core sector would have an impact on the Index of Industrial Production (IIP) data as these eight segments account for about 41% of the total factory output. Output growth rate of only fertiliser and cement reported healthy numbers. Photo: Aniruddha Chowdhury/Mint
The core sector would have an impact on the Index of Industrial Production (IIP) data as these eight segments account for about 41% of the total factory output. Output growth rate of only fertiliser and cement reported healthy numbers. Photo: Aniruddha Chowdhury/Mint

Summary

  • The index of the eight core industries rose an annual 4.3% in November, up from 3.7% in October, according to provisional data released by the Ministry of Commerce and Industry on Tuesday. It had expanded by 2.4% in September and contracted by 1.5% in August.

NEW DELHI : India's infrastructure output, which accounts for about two-fifths of industrial production, jumped to a four-month high in November, driven by a rise in six of the eight core constituent sectors during the month.

The index of the eight core industries rose an annual 4.3% in November, up from 3.7% in October, according to provisional data released by the Ministry of Commerce and Industry on Tuesday. It had expanded by 2.4% in September and contracted by 1.5% in August.

A year ago, the output of the eight core industries—coal, crude oil, steel, cement, electricity, fertilisers, refinery products and natural gas—had expanded by 7.9% year-on-year.

The provisional data for September, October and November could be revised next month.

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The rebound in manufacturing could significantly affect industrial production in November, data for which will be released in January.

Despite the recent uptick, growth in the core sectors during the first eight months of the current fiscal year stood at 4.25% on average, significantly lower than the 8.68% rise recorded in the same period of FY24.

Experts attribute the decline to a high base effect and weaker performance in sectors like crude oil and natural gas.

“There has been a pick up in infra activity, as seen also in government spending more on capex this month. Construction of homes also showed momentum and was reflected in steady growth in steel and cement. Low fertilizer output reflecs higher inventories being used. Coal production increased by 7.5%, which is reflective of better economic activity," said Madan Sabnavis, chief economist at state-run Bank of Baroda.

“We may expect IIP (index of industrial production) growth to be around 4.5-5% given festival demand," he added.

India's IIP grew an annual 3.5% in October, accelerating from 3.1% in September.

Sector-wise performance

Six of the eight sectors — coal, steel, cement, fertilisers, electricity and refinery products — reported an annual rise in production in November, while the output of crude oil and natural gas contracted.

Notably, four of the eight core sectors—crude oil, fertilisers, electricity, and cement—showed an improved performance in November compared to the previous month.

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Coal production rose 7.5% in November after a 7.8% contraction in October.

Crude oil production contracted 2.1% during the month, slower than the 4.8% decline in the previous month.

Natural gas production fell 1.9% in November, versus a 1.2% decline in October.

Refinery products output rose 2.9% in November, compared to a 5.2% expansion in October.

During November, steel production grew 4.8%, against a 5.2% expansion in October, and fertiliser output grew by 2%, accelerating from a 0.4% rise a month earlier.

Cement production rose 13% in November, against 3.1% in October.

Electricity production rose 3.8%, after growing by 2% in the previous month.

Manufacturing activity slows

Incidentally, India's manufacturing growth slowed in November, with activity easing to its weakest level in 11 months, as price pressures and softer domestic demand weighed on the sector.

The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, came in at 56.5 for November, down from 57.5 in October and matching the level recorded in September.

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The latest reading, though firmly above the 50-point threshold indicating expansion, was below the preliminary flash estimate of 57.3, reflecting a more subdued rise in factory orders and production.

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