NEW DELHI: India’s core sector contracted for the fourth consecutive month in November but the pace of contraction slowed to 1.5% from 5.8% in October led by growth in output of fertilizer, cement and refinery products, raising expectations of industrial production moving into the positive territory.
However, for the first eight months of the year, the core sector growth was zero compared with 5.1% in the April-November period of 2018, data released by the commerce and industry ministry showed on Tuesday.
“The core sector growth numbers for November, though disappointing at -1.5% has a silver lining in so far as there are certain sectors like cement and fertilizers that have registered positive growth,” said Madan Sabnavis, chief economist at CARE Ratings.
The core sector has a 40.27% of the weight of items included in the Index of Industrial Production (IIP)
Cement growth of 4.1% on a high base of 8.8% growth, indicates strong developments in the construction areas while a 13.6% growth in fertilizers reflects both demand for rabi sowing as well as build-up of inventory for the next season. A 3.1% growth in refinery products is an indicator of steady demand and exports.
However, the output of coal, crude oil, electricity, steel and natural gas contracted in November.
As per Sabnavis, decline is coal production which is linked to power is reflective of lower industrial demand as there is sluggishness in growth in manufacturing and contraction in steel output may be attributed to low performance of related industries like auto and capital goods which are large consumers of the metal.
“Overall IIP growth for November could just move into the positive terrain for November as there is a very favourable base effect of growth of just 0.2% last year,” he said.
Industrial production contracted for the third month running in October when it shrank 3.8%.
Source: Economic Times