Core sector growth hits 15-month low of 3.6% in January: government data | Economics and Policy News – Business Standard

India’s core manufacturing, which measures output from eight key industries, grew 3.6 percent in January, the lowest level in 15 months, an update to government data showed. Lower growth of 0.7 percent was recorded in October 2022.

The base effect, combined with single-digit growth in five industries and negative growth in two, slowed production in the first month of this year. In January last year, the core sector had grown by 9.7 percent.

The figures for December have been adjusted upwards from 3.8 percent to 4.9 percent.

Madan Sabnavis, chief economist at the Bank of Baroda, said January’s figures were a “mixed bag”.

Coal production grew 10.2 percent, the only sector to see double-digit growth in January, up from 10.7 percent previously.

Sabnavis said coal growth reflects “steady demand for power from businesses and households.”

“Because the winter in January was quite severe, the demand for heating actually increased,” he said.

While refinery products fell -4.3 percent, fertilizer growth fell -0.6 percent, the lowest growth since February 2022. Crude oil grew 0.7 percent in January, after negative growth in the previous two months.

“The oil sector is disappointed with refinery products, down 4.3%, with exports being one factor. Domestic demand was stable,” Sabnavis explains.

Meanwhile, production in the natural gas sector grew by 5.5 percent, steel production by 7 percent, cement production by 5.6 percent and electricity production by 5.2 percent.

Sabnavis said, “The good thing is that cement and steel, which are a reflection of government investment, saw quite good growth of 7 percent and 5.6 percent despite the high base effect. But the less good news was that total growth was only 3.6 percent.”

Manufacturing in the core sector grew by 7.7 percent in the ten months of this financial year (FY24), compared to 8.3 percent in the same period in FY23.

The core sector figures are becoming increasingly important as they account for 40.27 percent of the weight in the Index of Industrial Production (IIP), a key metric that measures manufacturing output.

Aditi Nayar, chief economist, head of research and outreach at ICRA Limited said, “With a relatively healthier trend being reflected by several other high-frequency indicators, we expect the IIP to report 2-4% growth in January 2024.”

Sabnavis also expects IIP growth to be in the range of 2-3 percent and said, “We do not expect a revival in consumer goods production this month.”

First print: March 01, 2024 | 12:08 pm IST