Core sectors' growth hits seven-month low in September

Output from India’s eight core sectors grew 4.4% in September, the lowest pace of growth in seven months which breaks a three-month streak of accelerating production that peaked with a 11.5% uptick in August.

On a sequential basis, this is the second successive month of decline in the Index of Eight Core industries compiled by the Department for Promotion of Industry and Internal Trade. The index which stood at 134.7 in July, declined by almost 1% month-on-month in August and fell a further 5% in September.

In September 2020, when the economy had largely opened up after the national COVID-19 lockdown, core sectors’ output had grown 0.6%. This September, five sectors registering a healthy growth, while crude oil production dipped 1.7% and fertilisers and electricity barely staying in positive territory with growth rates of 0.02% and 0.3%, respectively. Natural gas production surged 27.5% in September, from a 10.6% contraction in 2020, while cement output rose 10.8% from a 3.4% fall a year ago.

Although coal supplies remain a concern for the country’s power and metals producers, coal output grew 8.1% in September and there was no low base effect at work here as coal production had grown by a sharp 21% in September 2020. Coal output had grown 20.5% in August 2021.

Economists attributed the cooling off in the index to heavy rains hitting mining, construction activity and power demand, and said the sequential momentum would improve by year-on-year growth will likely stay in the same range in October.

“Lower core sector growth and the impact of semiconductor shortages on auto output are expected to dampen the September 2021 industrial production growth to 3%-5%, despite the pre-festive season inventory build-up suggested by the GST e-way bill data,” said Aditi Nayar, chief economist at ICRA. Core sectors constitute about 40% weightage in the index of industrial production.

“On an encouraging note, core output in September exceeded the pre-Covid level of September 2019 by 5%, led by coal, natural gas, steel, cement and electricity,” she added.

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