Eight core industries' output contracts 2.6% in November

NEW DELHI: India’s core sector shrank at a faster pace of 2.6% in November sharper than 0.9% contraction seen in October, pulled by natural gas, steel and cement and dimming hopes of a turnaround that was expected after the infra sector’s performance improved to -0.1% in September.

This is the ninth straight month that the core sector, that has a 40% weight in the index of industrial production, witnessed a contraction.

“Partly reflecting the unfavourable base effect, the performance of the core sectors deteriorated in November relative to the previous month, led by a broad-based downtrend in six of the eight constituents, except refinery products and crude oil,” said Aditi Nayar, principal economist at ICRA.


While the output of coal, fertilisers and electricity grew last months, the pace of growth was slower than that in October.
Data released by the commerce and industry ministry showed coal production rose 2.9%, fertilisers 1.6% and electricity 2.2%.

The ministry also revised the core sector contraction in October to 0.9% from
2.5% earlier on a revision in steel output growth to 4% from a 2.7% shrinkage earlier, and higher growth in cement and electricity production.

“The decline in growth in steel and cement to the negative zone blunts to a large extent the hopes of a revival in the manufacturing and infra spaces,” said Madan Sabnavis, chief economist at CARE Ratings.

The oil segments of crude oil, refinery products and natural gas witnessed negative growth rates, reflecting lower demand conditions as well as exports.

In November, steel output shrank 4.4%, cement 7.1%, and natural gas 9.3%, steeper than October. The pace of shrinkage in crude oil and natural gas slowed last month compared to the previous month.

“Final growth rate of Index of Eight Core Industries for August is revised to (-)6.9%,” the ministry said. The earlier contraction in August was 7.3%.

“Based on the available information, we expect the IIP to revert to a temporary but unpalatable 2-5% contraction in November,” Nayar said.

CARE Ratings expects IIP growth to be in the range of 0-1% as consumer goods are likely to remain upbeat for this month given the festival season factor.