Core sectors' output shrinks 1.8% in Aug on heavy showers

The output of eight core infrastructure industries shrank 1.8% in August from a year earlier, the first contraction in 42 months, compared with 6.1% expansion in the preceding month, according to the official data released on Monday. Experts blamed heavy seasonal showers in August over large swathes of the country, on top of an unfavourable base effect, for the slump.

Given their 40% weight in the index of industrial production (IIP), the poor show by the infrastructure industries could limit the August index of industrial production (IIP) expansion to just 1-1.5%, against 4.8% in July, experts said. IIP data for August will be released on October 12.

Apart from steel and fertilisers, six of the eight industries-coal, crude oil, natural gas, refinery products, cement and electricity-remained in the negative zone in August, the latest data showed.


A rainfall deficit in August last year had kept production and mining activities going, leading to an impressive 13.4% jump in output during the month from the previous year. Sequentially, the output of the core industries contracted 4.2% in August.

Steel production grew in August but at the lowest pace (4.5%) in 26 months, while fertilizer output rose 3.2%, against 5.3% in previous month.

However, the output of other industries, such as coal, crude oil, natural gas and refinery products contracted by 8.1%, 3.4%, 3.6% and 1%, respectively, in August. Electricity and cement output dropped 5% and 3%, respectively.

In July, only crude oil and natural gas had witnessed contraction while the other six industries recorded growth rates ranging from 5.3% to 7.9%.

With this, core sector growth in the first five months of the fiscal year touched 4.6%, against 8% a year before, the data showed.

Given the core infrastructure sector contraction, Icra chief economist Aditi Nayar expects IIP growth to have slowed to about 1% in August. "Core sector output may remain lacklustre in September 2024 given the late withdrawal of the monsoon, before normalising in the third quarter," she said.