Core sector growth rises to a 14-month high of 12.1% in August

India’s core sector output rose to a 14-month high of 12.1% in August compared with 8.4% in the previous month, indicating strengthening economic activity and support to the Reserve Bank of India to hold rates in the upcoming meeting next week.

“All in all, the data indicates that the recovery in the infrastructure industries is getting broad-based, which is a good sign for the economy,” said Ind-Ra economists Paras Jasrai and Sunil Kumar Sinha.

Economists say that the strength in the index of eight core industries, which constitutes 40% of the index of industrial production, is likely to translate into stellar IIP growth in August.


“Given the uptick in the core sector growth, as well as the healthy performance of high-frequency indicators such as auto output, GST e-way bills, rail freight etc, we forecast the IIP to expand by 9-11% in the month of August 2023," said Aditi Nayar, chief economist, Icra.

Reserve Bank of India’s Monetary Policy Committee is scheduled to meet from October 4-6 and will likely hold the policy rate at 6.5% for the fourth consecutive meeting.

An earlier ET report had pointed out that industrial growth is expected to receive a festive bump, with the push getting spillover to the rest of the year with improvement in monsoon rains, softening inflation, and election-related rise in spending.

“Going forward, the agency expects the core sector output to record a growth of around 8% yoy in September 2023 owing to stable progress in economic activity supported by the festive demand,” said Jasrai and Sinha.

Broad-based recovery

All eight sectors of the index recorded a rise for the second consecutive month, with five of the eight sectors registering double-digit increases in August.

“A truant monsoon helped to push up core sector growth to a robust 12.1% in August 2023, boosted by double-digit expansion in five of the eight components, except fertilisers, crude oil and refinery products, with the latter nonetheless recording a robust 9.5% increase,” Nayar noted.

Cement rose to a nine-month high of 18.9% in August, more than doubling the 6.9% growth witnessed in the previous month. Electricity generation rose to a 14-month high of 16.5%, whereas natural gas production was at an 18-month high of 10%.

“The buoyant growth in cement and steel sectors is getting a sustained support from government capex. The union government capex increased 10.8% yoy in August 2023,” Ind-Ra economists stated.