At 2.2% in January, core sector output up for second straight month

The output of eight core sectors of the economy managed to rise for a second straight month in January, growing by 2.2 per cent as key sectors like refinery products and electricity continued to see slow growth.

Core output had contracted for four months till November as a broad-based decline gripped most sectors. As a result, core sector output in the April-January period of the current fiscal year (FY20) dropped to 0.6 per cent, compared to 4.4 per cent in the corresponding period of the previous year.

The data released by the commerce and industry ministry on Friday showed output of refinery products rose by 1.9 per cent in January, down from 3 per cent growth seen in December. While the sector has remained volatile in FY20, officials continue to claim a solid recovery in production is underway as key refining units, which were closed earlier, have gone live. 

In January, coal production saw the highest uptick in output, rising by 8 per cent, up from 6 per cent in the previous month. The sector saw contraction remain entrenched till November, after a 24-month growth period ended in July. Elsewhere in the energy space, crude oil production continued its downward spiral, having completed a continuous chain of contraction for the past 16 months. 

Production reduced by 5.3 per cent, lower than the 7.4 per cent contraction in December. Experts said this was usual when oil price remained low as production was less remunerative. Natural gas production also contracted for a 10th straight month, reducing by 9.1 per cent in January.

However, overall electricity generation rose by 2.8 per cent in January, giving hope to a revival in manufacturing. Generation rose by 2.8 per cent after contracting for the previous five months as sluggishness in manufacturing is understood to have led to a steep fall in the power demand. 

The latest data signalled normalcy returning to infrastructure segment after a long pause, as both steel and cement output rose in January, albeit by smaller margins. Both sectors have been in the grips of volatility in the current year. Steel production rose by 2.2 per cent, after the 4.3 per cent growth seen in December. On the other hand, cement production rose by 5 per cent, down from the 5.5 per cent rise in the previous month.

Interestingly, the engulfing industrial slowdown caught up with the fertilizer sector in January as production shrank marginally by 0.1 per cent. Production had risen by double-digit figures over the past three months.

Experts predicted industrial production would remain subdued going ahead. “For January, industrial growth could be in the region of 2-3 per cent, based on this growth number. The impact of corona virus is unlikely to be witnessed in IIP this month, and would surface more likely in end-Feb and March,” Madan Sabnavis, chief economist at CARE Ratings, said.