Core sector growth slows to 5-month low in Feb; crude, natural gas output slips

New Delhi: India's core sector output slowed to a five-month low of 2.9% in February from 5.1% in January, as growth across most infrastructure sectors moderated, according to official data released Friday. The growth was 7.1% a year earlier and experts cited base effect for the slowdown last month.

"The infrastructure output growth was the lowest in five months, hit by an unfavourable base effect," said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra).

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


Madan Sabnavis, chief economist at Bank of Baroda, noted that February's growth was primarily driven by strong performances in the steel and cement sectors.

Six of these industries grew in February, with fertiliser output surging to a nearly two-year high of 10.2%.

"Fertiliser growth though in double digits is more a base effect push up and partial restocking by companies," Sabnavis explained.

Cement recorded the fastest growth at 10.5%.

"The cement output grew due to the sustained pickup in government capital expenditure," Jasrai said.

Next was steel (5.6%), followed by electricity (2.8%), coal (1.7%) and refinery products (0.8%).

Crude oil and natural gas output declined by 5.2% and 6.0%, respectively, from a year earlier.

"The negative growth is due to lower demand conditions," said Sabnavis. Overall, the core sector growth slowed to 4.4% in the first 11 month of fiscal 2024-25 (till February) from 7.8% in the corresponding period last year.

These eight sectors account for 40.27% weight in the Index of Industrial Production (IIP), which measures industrial activity.

IIP growth improved to 5% in January 2025 from 3.2% in December.

Ind-Ra anticipates core sector growth of around 4.0% in March, while Bank of Baroda projects 4.5%.

For IIP, Ind-Ra estimates around 3.0% growth in February, whereas Bank of Baroda expects it to be in the range of 3.0-3.5%.