Core sector growth rebounds to 2% in September

Core sector growth in September

India’s core sector growth rebounded to 2 percent in September compared with a 42-month low of 1.6 percent contraction witnessed in the previous month, with five of the eight industries showing an improvement.

While performance of coal, petroleum refineries, natural gas, cement and electricity improved, crude oil steel and fertilisers continued to lag in the month.

Coal expanded 2.6 percent compared with 8.1 percent contraction witnessed in August, while the petroleum refinery business was up 5.8 percent in September.

However, the performance of eight core industries was lower at 4.2 percent in the first half of the current fiscal year compared with the 8.2 percent growth witnessed in H1FY24, as growth dipped across all eight industries.

On the other hand, despite an improvement, natural gas and electricity continued to witness contraction for yet another month.

The contraction in crude widened further to 3.9 percent compared with 3.4 percent in August.

Sequentially, September marked the fourth consecutive month of contraction for the index, but data indicated a silver lining.

"Notably, the growth in cement production improved to a 6-month high of 7.1% in September 2024 from a contraction of 3.0% in August 2024, aided by a favourable base. In contrast, steel output rose by just 1.5% in the month, the slowest pace in 33 months," said Aditi Nayar, chief economist, ICRA.

Favourable base is also likely to support index of industrial production growth in the month, Nayar said, pointing to a favorable base, and a sharp uptick in the growth in GST e-way bills helped by pre-festive stocking.

ICRA predicts IIP to average 3-5 percent in September.

An MC analysis shows that growth in consumer durables, which forms an important component of IIP is higher during the three months preceding diwali than the rest of the year.