Output of the eight core sectors in the country rose 6.8 per cent in November, a 13-month high, as compared to the five per cent rise in October, indicating a possible revival in industrial production growth.
This was primarily led by a double-digit jump in cement and steel production, as well as a sustained rise in refinery products. Contributing 40 per cent to total industrial production, output in the core sector was supposed to have been poised to take off in October but held back by declines in the crude oil and cement sectors.
Data issued by the commerce and industry ministry on Monday showed the eight core segments — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and electricity — cumulatively grew 3.9 per cent in the first seven months (April to October) of this financial year. This was lower than the 4.9 per cent growth in the corresponding period of 2016-17.
Some suggested this could point to overall industrial revival from November on. "We expect growth of the Index of Industrial Production (IIP) to rebound to a healthy five-six per cent in November. The favourable base effect related to the temporary slowdown in activity after demonetisation is likely to boost volume growth in a variety of sectors in the remainder of FY18," said Aditi Nayar, principal economist at rating agency Icra.
IIP growth had plunged to 2.2 per cent in October, slowing for a third straight month. It was 4.1 per cent for September, after a 4.5 per cent rise in August. Industrial production growth declined by more than half to 2.5 per cent in the first seven months of the financial year, against 5.5 per cent in the corresponding period a year before. A silver lining is that capital goods production showed a rising trend for a third straight month.
In November, cement production remained the biggest growth puller, turning around from a 1.3 per cent decline in October. The sector has seen a decline in seven months during the past one year. Experts blame this on slowdown in the real estate sector, leading to lower demand for cement and steel. This happened due to a combination of demonetisation, the new goods and services tax and the new Real Estate Regulatory Authority law and rules.
Further cementing hope that the realty and infrastructure segments would see sustained growth, steel production rose 16.6 per cent in November, double the 8.4 per cent rise the previous month.
On the energy side, while both crude oil and natural gas saw smaller rises in growth, refinery products managed an 8.2 per cent rise in November. It has settled into the growth charts since September and had risen 7.5 per cent in October. However, crude oil and natural gas production rose by only 0.2 per cent and 2.4 per cent, respectively.
The rate of rise in coal production fell for a third straight month, with a decline of 0.2 per cent in November. It had a high of 15.3 per cent back in August. The rise in October was 3.9 per cent. As a result, electricity generation growth also remained muted at 1.9 per cent in November, also a slowing in growth over three months. It had grown 3.2 per cent in October.
"According to initial data released by the Central Electricity Authority, growth of thermal electricity generation eased to a marginal 0.9 per cent in November, from 3.4 per cent in October, even as expansion in hydroelectricity improved to 9.6 per cent, from 4.6 per cent," Nayar said.
Fertiliser production rose but only by 0.3 per cent in November. Experts pointed to renewed demand in the rabi season and new production in manufacturing plants after earlier stocks got over.