Core sector growth slows down to 3.7% in January; restrictions to rein in Omicron cases impacted economic activity

New Delhi: The core sector output grew 3.7% in January, lower than 4.1% in the previous month, pulled down by natural gas, refinery, fertiliser and electricity, official data released on Monday showed.

The core sector had grown 1.3% in January 2021. The Omicron wave had impacted economic activity in the month after several states imposed restrictions to curb the spread. The core sector index measures the output of eight infrastructure sectors-coal, steel, cement, fertiliser, electricity, natural gas, refinery products and crude oil. "The third wave had an expectedly muted impact on India's core sectors in January 2022, with the pace of growth slipping mildly," said Aditi Nayar, chief economist ICRA, forecasting about 1% industrial growth in January.

Six of the eight sectors - coal (8.2%), natural gas (11.7%), refinery products (3.7%), steel (2.8%), cement (13.6%) and electricity (0.5%) - reported growth in the month.

Crude oil and fertiliser production shrank 2.4% and 2% respectively in January.

In the first 10 months of the current fiscal, the core sector has grown 11.6% compared with 8.6% contraction in the year-ago period.

On the positive side, compared with pre-Covid (February 2020) levels, output of all the core sectors was higher in January 2022. While this reflects the resilience of the infrastructure industries to the Covid-related disruption, the global recovery faces fresh headwinds due to the Russia-Ukraine conflict, said Sunil Kumar Sinha, principal economist, India Ratings and Research.

"Going forward, this is likely to play a spoilsport to the nascent recovery witnessed in India as well. Against this backdrop, the core sector output growth is expected to remain tepid in the near term."