Coal & electricity slow core sector growth to 4.6% in January

India's core sector growth marginally slowed to 4.6% in January from 4.8% in the month before, due to moderation in the coal and electricity sectors, according to official data released Friday. On a yearly basis, however, the growth accelerated from 4.2% in January 2024, helped by the base effect.

"The monthly slowdown was caused by slower growth in electricity generation and coal output, even as the latter was much better than expected given the decline in Coal India Ltd's output in the month," said Rahul Agrawal, senior economist at ratings firm ICRA.

The core sector consists of eight industries: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.

Six of these sectors recorded growth, with cement output reaching a 15-month high of 14.5%.

This was due to good demand in the real estate and roads sectors, said Madan Sabnavis, chief economist at Bank of Baroda.

Next was refinery products (8.3%), followed by coal (4.6%), steel (3.7%) and fertilisers (3%), according to the data from the Ministry of Commerce and Industry. Coal and electricity (1.3%) output marked the slowest growth since September 2024.

"Lower power demand due to the unusual rise in temperatures could be behind this," said Paras Jasrai, senior economic analyst at India Ratings & Research (Ind-Ra).

Production of crude oil and natural gas declined by 1.1% and 1.5%, respectively, in January compared with the previous year. Sabnavis attributed this to supply side issues and higher imports.

Overall, the core sector growth slowed to 4.4% in FY25 (till January) compared with 7.8% in the corresponding period last fiscal year.

The eight sectors contribute 40.27% to the Index of Industrial Production (IIP), which measures industrial activity. IIP growth had slowed to 3.2% in December 2024 from a six-month high of 5.2% in November. Bank of Baroda forecasts IIP growth to be between 4% and 5% in January, while ICRA expects 3.2%. Ind-Ra projects growth in the range of 3-4%.