Core sector growth slows to 4 per cent in December

New Delhi: Growth in India’s infrastructure sector slowed to a five-month low of 4% in December on the back of declining steel and crude oil output. Core sector growth was 7.4% in November and 5.6% in December 2016, according to official data released on Wednesday.

The eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity constitute 40.3% of the total industrial production. Output of coal contracted 0.1% and crude oil declined 2.1%, while steel production and electricity generation slowed to 2.6% and 3.3%, respectively.

“The disaggregated data reveals a broad-based sequential slowdown, with six of the eight constituents of the core sector excluding cement and fertilizers, displaying a downtick in volume growth,” said Aditi Nayar, principal economist at ICRA.

A favourable base effect due to the temporary slowing in activity in December 2016 after demonetisation is likely to boost volume growth in a variety of sectors in the remaining months of the financial year, independent economists said. Refinery products, natural gas, fertiliser and cement recorded healthy growth last month, data released by the commerce and industry ministry showed.

Madan Sabnavis, chief economist at CARE Ratings, said the slowdown in steel for this month needs to be monitored carefully to judge whether it would continue or would be a one-off case. Cumulatively, growth in the eight core sectors during April-December slowed to 4% as against 5.3% in the same period a year earlier.

The growth in the key sectors will have implications for the Index of Industrial Production (IIP).

While India Ratings said December core sector growth points towards a weaker IIP growth number for the month, CARE Ratings expects IIP growth likely to be lower at 3.5-4% this month.

At 8.4%, India’s factory output expanded at its fastest in over two years in November.