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India's core sector growth down to 19-month low of 1.8% in January

Electricity, refinery products remain in negative zone

Subhayan Chakraborty  |  New Delhi 

India's core sector growth down to 19-month low of 1.8% in January

The first month of 2019 saw growth in the eight core sectors of the economy crash to a 19-month low at 1.8 per cent, slipping below the 2.8 per cent growth in December.

continued to go down for the third straight month in January, as the two largest contributing sectors of and refinery products, remained in the negative zone.

Data released by the commerce and industry ministry on Saturday showed that the eight segments — coal, crude oil, natural gas, refinery products, fertiliser, steel, and — cumulatively grew 4.5 per cent in April-January of the current financial year, remaining higher than the 4.1 per cent growth in the corresponding period of FY18.

Contributing 40 per cent to the total industrial production, output of the core sectors was brought down by the sudden contraction in generation by 0.4 per cent in January, down from a 4.4 per cent rise in December.

“In fact, the electricity sector growth in January is lowest in the last 71 months. Last time electricity sector witnessed contraction was in February 2013,” Devendra Kumar Pant, Chief Economist at India Ratings & Research, said. This has come as a surprise for economists and a low growth in output has been blamed.

output has steeply fallen since October, and remained only 1.7 per cent in January. Slower growth in production has mirrored that of electricity generation as the initial impetus of some government schemes has tapered. Imports of coal has also been higher, which have replaced domestic production, economists said.

India's core sector growth down to 19-month low of 1.8% in January

On the other hand, refinery products, which command almost 30 per cent of the core sector index, continued to contract for the second straight month. It went down by 2.6 per cent in January, as opposed to 4.8 per cent in the previous month.

Elsewhere in the energy space, lower prices continued to impact production as well as exports of refinery product. production went down by 4.3 per cent, the same as the previous month.

“We expect Brent oil to remain positive as OPEC production cut, Venezuela and Libya issues could keep oil on the boil, US trade talks with China would also be watched closely for further clarity on demand growth,” Abhishek Bansal, Chairman of commodity and financial services provider ABans said.

production, however, fared better, rising by 6.2 per cent, up from 4.2 per cent in December, 2018.

“The two segments, which continue to do well, are and that can be linked with higher government capex. This is also reflected in the higher fiscal deficit numbers of the government. This has been the prime driving force of the infra industries through this year,” Madan Sabnavis, chief economist at CARE Ratings, said.

While output growth fell to 8.2 per cent in January, down from the 12.9 per cent growth in the preceding month, continued to hold on to double digit growth of 11 per cent in January.

However, increased production in allowed growth in the sector to be at a 13-month high.

Finally, production bounced back in January, registering a 10.5 per cent rise, after three successive months of fall. Higher fertilizer growth has come over a negative base effect last year. This can be attributed more to restocking to an extent as the main demand season for sowing is completed, Sabnavis added.

Industrial output (measured by IIP) is expected to grow by about 2 per cent in January, 2019, with a downward bias due to high base effect, according to CARE Ratings.

First Published: Thu, February 28 2019. 23:24 IST