Core sector growth eases marginally to 8% in July

India’s core sector registered an 8% growth in July, compared with 8.3% in the previous month, as all eight sectors recorded a positive growth for the first time in 14 months, according to data released Friday.

While the continuation of government capex (both centre and states) in July led to a strong performance in steel and cement sectors, economists noted that the growth in cement and electricity sector, despite seasonal rains, indicated a progression of economic activity.

“Overall, the recovery in the infrastructure industries appears to be ticking off on a pervasive note which bodes well for the private sector capex cycle which Ind-Ra believes is at the cusp of a pickup,” said Paras Jasrai and Sunil K Sinha, economists at Ind-Ra.


On Friday, another data released by the government showed GDP growth rising to a four-quarter high of 7.8% on the back of rising consumption and sustained capex.

Economists pointed out that a private capex revival was necessary for India to sustain growth momentum.

Although infrastructure sector has been performing well, consumer-related sectors are yet to show signs of recovery. Despite, a high growth in core output, industrial growth eased to a three-month low of 3.7% in June.

However, economists say that the strength in index of eight core industries, which constitutes 40% of the index of industrial production, is likely to translate into better IIP growth in July.

“Based on these numbers, the IIP growth rate would be in the range of 5-6% for July,” said Madan Sabnavis, chief economist, Bank of Baroda.

They further point that core output is likely to stay elevated in August as well.

“Going forward, the agency expects the core sector output to record a growth of over 7% yoy in August 2023 on the back of favourable signs from high-frequency indicators (such as power generation, etc) and sustained capex frontloading by the general government,” said Ind-Ra economists.

Broad-based recovery
While five of the eight sectors recorded buoyant growth in July, three registered a positive rise.

The steel industry expanded by 13.5% in July down from 20.8% in June, cement growth also eased to 7.1% from 9.9% in the previous month.

“Steel and cement both registered good growth rates on the back of more infra activity with the government driving the demand as their capex was on course,” Sabnavis said.

On the other hand, coal recorded a rise of 14.9% in July from 9.8% in the previous month and electricity expanded 6.9% vis-à-vis 4.2% in June.

“While the crude oil saw a positive yoy growth (2.1% yoy) in July 2023 after a gap of 13 months, the growth in refined products and fertilisers slowed to 3.6% yoy and 3.3% yoy (at a 17-month low) compared to the previous month,” Ind-Ra noted.

The fertiliser growth is likely to pick up as rabi sowing starts, experts pointed.