India's core sectors experience 14-month low in growth for December

The growth of India's eight core sectors witnessed a significant slowdown, reaching a 14-month low of 3.8 per cent in December 2023. This represents a stark decline from the 8.3 per cent recorded in the same period the previous year, as well as a revised growth rate of 7.9 per cent in November 2023.

The Index of Core Industries (ICI), released by the Commerce and Industry Ministry on 31 January, revealed that electricity generation, accounting for a substantial 20 per cent weightage in the ICI, hit an eight-month low at 0.6 per cent. Additionally, crude oil, a key component, contracted for the second consecutive month, experiencing a sharp decline of 1 per cent, the most substantial drop since June 2023.

Despite these setbacks, the ICI remained 5.9 per cent above the levels observed in November 2023, reflecting a notable increase and marking a nine-month peak in actual output levels. Coal production, albeit growing at the slowest year-on-year rate in six months at 10.6 per cent, reached its highest output levels since April 2023.

Refinery products and steel output achieved their highest levels since April, although the annualised growth rates witnessed a significant slowdown. Refinery products grew at a nine-month low pace of 2.6 per cent in December, while steel output expanded at a 14-month low rate of 5.9 per cent.

Cement production rebounded from a 4 per cent contraction in November to a 1.3 per cent rise in December, showing a remarkable 18.7 per cent surge in sequential terms, reaching production levels not seen since July.

Fertilizers production experienced a seven-month high growth rate of 5.8 per cent, with output levels reaching their highest point since May. Natural gas, however, grew at a three-month low rate of 6.6 per cent.^.

These core sectors collectively contribute slightly over 40 per cent to the Index of Industrial Production (IIP), which itself had recorded an eight-month low growth of 2.4 per cent in November. Analysts, including Bank of Baroda's Chief Economist Madan Sabnavis and ICRA's Chief Economist Aditi Nayar, anticipate a modest uptick in IIP for December.

Sabnavis predicts a 2 per cent -3 per cent increase, while Nayar places it in the range of 1per cent to 3 per cent. The official IIP figures for December are scheduled for release on 12 February, providing a comprehensive overview of the country's industrial landscape and economic trajectory.