Core growth slows to 15-month low in Feb, IIP looks bleak

NEW DELHI: India’s core sector growth slowed to a 15-month low in February, led by a drop in cement output, suggesting weakness in the crucial infrastructure segments of the economy.

Growth, as measured by the Index of Eight Core Industries, eased to 1% in February from 3.4% in January and 9.4% a year earlier, data released by the commerce and industry ministry showed on Friday.

The core sector indicator has a 38% weight in the Index of Industrial Production and a slowing suggests industrial growth could pull back from the 2.7% expansion in January.


“The actual production levels of every sector are lower in February, which means that overall demand is not there on a sustained basis,” said Sunil Kumar Sinha, principal economist at India Ratings & Research, a Fitch Group company.

“The infrastructure sector will be in considerable struggle in the foreseeable future till the time investment revives.”

The eight infrastructure sectors are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. A 15.8% fall in cement output in February, which in turn was the result of stagnant construction activity, contributed to the decline. Only coal, steel and electricity recorded expansion.

Steel output rose 8.7% and coal production rose 7.1% in February, the most in seven months. Electricity generation moderated to 1.5% relative to the 4.8% growth in January.

“Notwithstanding an unfavourable base effect, the deepening contraction in cement output suggests that the disruption to construction activities that set in after the note ban is yet to be arrested,” said Aditi Nayar, principal economist at ICRA, a Moody’s Investors Service company.

Fertiliser output contracted 5.3% and crude oil production fell 3.4% in February. Refinery production declined 2.3% and natural gas output shrank 1.7%.

“Given one less working day in February 2017 relative to February 2016, we expect the IIP to post a subdued volume growth in February 2017,” Nayar said. Industrial production rose 2.7% in January from a year ago, the second-highest monthly growth this year, after 5.7% recorded in November. The statistics office is scheduled to release IIP data for February on April 12.