Core sector growth jumps to 12.1% on low base effect

India’s core sectors grew 12.1% in October from a revised uptick of 9.2% in September, with all eight sectors clocking positive growth for only the third time in 18 months, and five of them recording a double-digit surge.

India’s core sectors grew 12.1% in October from a revised uptick of 9.2% in September, with all eight sectors clocking positive growth for only the third time in 18 months, and five of them recording a double-digit surge.

Base effects from last October, when the Index of Core Industries (ICI) had grown a mere 0.7% and four sectors had recorded a contraction, helped bolster the uptick this October, but output levels also saw a sequential uptick of 2.84% from September 2023.

The core sectors constitute little over 40% of the Index of Industrial Production (IIP) and their improved headline growth augurs well for industrial output to grow at a higher pace than the three-month low of 5.8% recorded in September.

Electricity generation led October’s performance with a 20.3% rise, followed by coal output that was up 18.4%, Cement (17.1%), Steel (11%), and Natural Gas (9.9%). Cement and Natural Gas had recorded a contraction of 4.2% in October 2022.

Fertilisers’ production grew at a five-month high pace of 5.3%, while refinery products rose 4.2% compared to a 3.1% contraction last October. Crude oil output grew 1.3%, marking only the third month of growth in the past 13 months.

“Fertilisers production has increased in preparation for the Rabi crop sowing this month and Cement has benefited from a negative base effect as well as a pick up in housing sector,” said Madan Sabnavis, chief economist at Bank of Baroda.

“Higher power growth indicates good economic activity supported by the coal sector. IIP growth for October would tend to be in the 6%-8% range provided support comes from consumer goods where there were mixed trends seen in the run up to the festive season,” he added.