January core sector growth moderates to 3.7%

Crude oil output slips for 50th month in a row, fertiliser production dips 2%

India’s output from all eight core infrastructure sectors surpassed pre-pandemic production levels this January, even as the pace of growth slowed marginally to 3.7% from a 4.1% uptick recorded in December 2021. 

Crude oil output continued to dip for the 50 th month in a row, dropping 2.4% year-on-year in January, even as fertilizer production entered contractionary mode with a 2% dip from January 2021 levels.

“Sequentially, output of the eight core sectors expanded moderately by 2% in January 2022 compared with a robust growth of 7.3% in December 2021… there was a broad-based moderation in momentum across sectors with natural gas and fertilisers too contracting sequentially,” CARE Ratings economists said in a note. 

Steel output recovered into growth territory from a 1% contraction in December, rising 2.8% in January, while cement output recorded robust positive growth for the second month in a row at 13.6% in January, after a drop in November 2021. 

Although the 3.7% growth in core sectors suggests a muted impact of the third COVID-19 wave in the country, ICRA chief economist Aditi Nayar said the disaggregated trend is ‘slightly less encouraging’, with all the sectors except coal and steel recording a slowdown in the year-on-year performance in January 2022 relative to the previous month. 

“We expect the Index of Industrial Production (IIP) to grow at around 1% in January 2022 from the initial growth estimate of 0.4% for December 2021,” Ms. Nayar said. The core sectors account for 40.27% of the IIP.

India Ratings economists Sunil Kumar Sinha and Paras Jasrai expressed concern at the weak growth in petroleum and refinery products despite a low base from January 2021, when output contracted 2.6%.