Output from India’s eight core sectors hit a three-month low in November, contracting 2.6% in the festive month, with coal, fertilisers and electricity the only sectors to record positive growth on a year-on-year basis, suggesting the economy is still not out of the woods.
The good news is that the Index of Eight Core Industries was revised upwards for both August and October, based on updated data inputs received by the Office of Economic Adviser in the Department for Promotion of Industry and Internal Trade that compiles the data.
Core sectors’ output shrank by just 0.9% in October compared to an earlier estimate of 2.5% contraction. The index had contracted 0.1% in September, while revised final numbers for August reflect a 6.9% contraction compared to the original estimate of a far sharper 8.5% contraction.
Electricity output rose for the third month in a row, albeit at a slower pace of 2.2%, while coal production rose year-on-year for the fourth month in a row at 2.9%.
Fertiliser production continued to grow, rising 1.6% in November. Fertilisers remains the only sector to have recorded growth in the first eight months of 2020-21, growing 3.8% between April and November, 2020-21.
On a cumulative basis from April to November, the eight sectors’ index has declined 11.4% from the same period a year ago. These sectors account for around 40% of the Index of Industrial Production or IIP.
Refinery products, natural gas and crude oil output continued to decline, falling 4.8%, 9.3% and 4.9%, respectively. A fresh cause of concern, however, emerged in the steel and cement sectors, where output collapsed by 4.4% and 7.1%, respectively, in November, after a fledgling recovery.
“Steel, after recording three consecutive months of positive growth, and cement, after recording a positive growth in October 2020, slipped into contraction in November 2020. This shows that the industrial recovery continues to be uneven and fragile,” said Sunil Kumar Sinha, principal economist at India Ratings and Research.
“Given the performance of eight core sectors in November 2020, we expect the IIP growth to remain weak in November 2020. Also, it will be interesting to see whether the momentum recorded in factory output due to pent up, festive demand for consumer durables and non-durables during the past two months continues in November 2020,” Mr. Sinha said.