Core sector growth declined to three-month low of 2.3% in February

Core sector growth picks up

• Core sector growth slowed to 2.3 percent in February.
• Electricity output growth decelerated sharply to 0.5 percent.
• Steel and cement grew but lost momentum compared to January.

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India’s core sector growth slowed sharply to a three-month low of 2.3 percent in February from 4.7 percent in January, dragged down by weaker electricity generation and continued contraction in oil and gas output, according to data released on March 20.

The eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — together make up two-fifths of the Index of Industrial Production (IIP), making the slowdown a key signal for broader industrial activity.

A major reason for the moderation was the sharp deceleration in electricity output growth to 0.5 percent in February, down from 5.2 percent in January. Given electricity’s high weight of nearly 20 percent, the slowdown had a significant impact on the overall number.

Steel and cement remained the main bright spots, though both also lost momentum. Steel output grew 7.2 percent in February compared with 11.5 percent in January, while cement expanded 9.3 percent, lower than the 11.3 percent growth recorded in the previous month.

Among energy-related sectors, the picture remained weak. Crude oil production contracted 5.2 percent, while natural gas output fell 5 percent, extending a long run of declines. Refinery products also slipped into contraction, falling 1 percent in February after flat growth in January.

Coal output grew 2.3 percent, down from 3.1 percent a month earlier, while fertiliser production rose 3.4 percent, slightly lower than the 3.7 percent increase in January.

The data suggests that while construction-linked sectors such as steel and cement continue to support industrial activity, weakness in energy production and softer electricity growth are weighing on the headline print.

The weakness is expected to continue from the coming months as well with a war in West Asia weighing on output.