Core sector growth falls to 8-month low

Official data showed on infrastructure industries had slowed down the most since January when production grew 1.6%

Output of core industries grew at an eight-month low of 1.9 per cent in September, down from 5.8 per cent in August, indicating overall industrial production will be subdued. This could have repercussions on the gross domestic product for the second quarter.

Official data showed on Friday infrastructure industries had slowed down the most since January when production grew 1.6 per cent. Output had grown by nine per cent in September last year, muting the sector’s performance last month.

“This is largely because of the high base effect. As the effect subsides from October, core sector growth will rise for the remaining part of 2014-15,” said Devendra Pant, chief economist with Indian Ratings.

Infrastructure industries’ production grew four per cent in the first half of 2014-15, lower than 5 per cent in the same period of the prior year.

Production of crude oil, natural gas, refineries and fertilisers contracted for a second month in September as output of coal, cement, steel and electricity rose. The growth was, however, lower in September than in August.

Electricity generation, which has been propping up industrial data, grew 3.8 per cent in September, less than a third of the 12.6 per cent in August. Cement production grew 3.2 per cent in September, against 10.3 per cent in the previous month, while the output of steel grew four per cent, against 9.1 per cent. Growth in coal production was a respectable 7.2 per cent but even this was lower than the 13.4 per cent in August.

Over a third of the Index of Industrial Production (IIP) comprises output of infrastructure industries. Industrial production rose just 0.4 per cent and 0.5 per cent in July and August, respectively. If it grows at below one per cent, September will be the third consecutive month of manufacturing weakness.