Core sector output recovers, rises 0.9% in December

Fertilizer, coal production contributes to growth as oil, natural gas continues to drop

The combined output of eight crucial infrastructure sectors rose by a slight 0.9 per cent in December after contracting 1.3 per cent in the month before, which may give a slight push to the Index of Industrial Production (IIP). IIP too fell in the month of November.

The industries carrying a total weight of nearly 38 per cent in the IIP continue to be hit by falling international crude oil prices coupled with weakening subdued domestic and international demand. Data released by the ministry of commerce & industry on Monday showed the eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — grew a cumulative 1.9 per cent in the months up to December in the current financial year against 5.7 per cent  in the corresponding period of the previous year.

Data released earlier in the day showed that the manufacturing sector had also registered a four-month high growth in January following inflows of new business from both domestic and export sources, according to the widely tracked Nikkei purchasing managers’ index (PMI) survey. Core sector growth had contracted 1.3 per cent in November. This was the first time in seven months or only the second time in FY16 that it had fallen after maintaining steady growth at 3.2 per cent in the two months before. IIP too fell 3.2 per cent in November.

The December figures of the core sector were pulled down by the continued and accelerating decline in crude oil, natural gas which went down 4.1 and 6.1 per cent, respectively. However, coal production and electricity generation both recovered significantly to manage a slight uptick in overall figures.

“The muted 0.9 per cent core sector growth is disappointing, as it has fallen short of the average of 1.9 per cent for the first three quarters of 2015-16,” said Aditi Nayar, senior economist at Icra.