Core sector growth eases to a six-month low of 7.8% in November

A delayed festival season and a high base effect dragged the core sector output to a six-month low of 7.8% in November compared with 12% in October, according to government data released Friday.

The core sector growth averaged 9.9% in the two months, indicating continued infrastructure momentum in the third quarter.

“On average, the core sector expanded by nearly 10% in October-November 2023, an encouraging sign,” said Aditi Nayar, chief economist, Icra.


The Index of Eight Core Industries measures the output of key infrastructure industries – coal, natural gas, petroleum refining, crude, electricity, cement, and steel.

“The positive aspect was the sharp uptick seen in the output of petroleum and refinery products, which is reflective of healthy economic activity,” said Rajani Sinha, chief economist, CareEdge.

Refinery products grew at a 17-month high of 12.4% in November compared with 4.2% in October.

However, economists note that the positive momentum is unlikely to reflect in industrial production data, which has a 40% component of core sector, for November.

“Given the larger number of factory holidays, we anticipate a modest 2-4% rise in the IIP in November 2023,” Nayar said.

Industrial output had jumped to a 16-month high of 11.7% in October.

A double-digit growth in the manufacturing sector had pushed GDP growth to 7.6% in the second quarter of the fiscal, leading to the Reserve Bank of India’s Monetary Policy Committee revising its full-year growth target to 7%.

The MPC expects growth to ease to 6.5% in Q3 and further to 6% in the last quarter of the year.

Strong base effects will likely keep core sector growth subdued for the remainder of the fiscal, according to economists.

“Going forward in the rest of the fiscal, core sector growth is likely to slow down due to strong base effect; the core sector grew between 7.4% and 9.7% during December 2022 and February 2023,” said Devendra K Pant, chief economist, India Ratings and Research.

Mixed performance

Two of the eight sectors—cement and crude—contracted in November, while coal and petroleum refineries maintained double-digit growth in November.

“Disaggregated data remained mixed, with crude oil and cement displaying a YoY contraction in November 2023, even as petroleum refinery products and coal recorded a double-digit expansion,” said Nayar.

The cement sector contracted 3.6%, from a 17.4% growth the previous month, hitting its lowest level in 13 months. November also marks the first contraction for the industry in eight months.

“The high base effect has come in the way of cement production, which has turned negative. The slowdown in housing is also a factor here,” said Madan Sabnavis, chief economist at the Bank of Baroda.

Electricity growth also eased considerably to 5.6% from 20.3% in the previous month. Coal grew 10.9%, whereas steel maintained a 9.1% growth.

(index of eight core industries, % change, y-o-y)
Nov-22	5.7
Dec-22	8.3
Jan-23	9.7
Feb-23	7.4
Mar-23	4.2
Apr-23	4.6
May-23	5.2
Jun-23	8.4
Jul-23	8.5
Aug-23	13.4
Sep-23	9.2
Oct-23	12
Nov-23	7.8
Ministry of Commerce

(% change, y-o-y)
Sector	Nov-23	Oct-23
Coal	10.9	18.4
Crude Oil	-0.4	1.3
Natural Gas	7.6	9.9
Refinery Products	12.4	4.2
Fertilizers	3.4	5.3
Steel	9.1	10.7
Cement	-3.6	17.4
Electricity	5.6	20.3
Ministry of Commerce