The output of eight core industries’ rose 4.3% on year in November, the highest pace in four months, primarily due to an uptick in production of coal, cement and steel, according to official data released on Tuesday.
In November 2023, the core sector had grown by 7.9% on year, and in October by 3.7%. In April-November, however, the core sector’s growth averaged 4.2% as against 8.7% in the corresponding period of FY24.
Growth in the core industries have been far lower this year, as the output growth of five sectors, namely, crude oil, natural gas, refinery products, fertilisers, & cement, have been muted. These sectors collectively carry a weight of 52% in the core basket.
In November, coal’s production rose by 7.5% on year, and steel’s output by 4.8%. Cement’s output specifically soared by 13% year-on-year, the highest growth recorded this fiscal. While some part of cement growth is led by base effect (-4.7% growth last year), the sharply higher print also denotes recovery in economic activity–mainly construction and manufacturing–from the lows seen in Q2, say analysts.
“Overall from Q2 to Q3, we could say there is improvement, but a broad based revival is still awaited,” said Anitha Rangan, economist, Equirus Securities. “Overall, growth momentum has slowed down and a 7% plus growth seems distant with these trends. At best, these trends indicate a 6-6.5% GDP growth this fiscal,” she added. Based on the core sector’s output, economists expect the Index of Industrial Production (IIP) to grow by 5-7% in November.
In November, crude oil production contracted 2.1% on year, and natural gas by 1.9%. Both these sectors, respectively, have seen year-on-year contraction in production volumes for seven straight months and five consecutive months.
Refinery products’ production growth slowed to three-month low of 2.9% in November, while that of fertilisers rose to a three-month high 2%. Electricity growth during the month stood at a four-month high of 3.8%.
The finance ministry has projected GDP to grow at 6.5% in FY25, which is 10 basis points lower than the Reserve Bank of India’s (RBI) projection of 6.6% for the year.
In the November’s ‘Monthly Economic Review’ report, the ministry said the outlook for Q3FY25 “appears bright”, as reflected in the performance of high-frequency indicators (HFIs) for October and November 2024.
The report said that industrial activity is likely to “gain traction” going forward, and added that the conclusion of the monsoon season and the expected increase in public capex will likely support the cement, iron, steel, and electricity sectors.