India's core sector growth slumps to 14-month low of 3.8% in December

In December 2022, India’s eight core sectors – which include coal, crude oil, natural gas, refinery products, fertiliser, cement, electricity, and steel – had grown by 8.3 percent.

India's eight core sectors posted a growth of 3.8 percent in December, according to data released by the Ministry of Commerce and Industry on January 31.

At 3.8 percent, the growth in India's eight key infrastructure industries - coal, crude oil, steel, cement, electricity, fertilisers, refinery products and natural gas – in the last month of 2023 is the lowest in 14 months.

In November 2023, core sector growth had printed in at 7.8 percent. The commerce ministry, on January 31, revised this figure slightly up to 7.9 percent. The output of the eight core sectors had grown by 8.3 percent in December 2022.

In April-December, the output of India's eight core industries was 8.1 percent higher year-on-year, the same as in the first nine months of 2022-23.

The weaker core sector growth in December was largely due to an unfavourable base, with with the overall index of the eight core industries having surged by 10.1 percent month-on-month in December 2022 - the period on whose basis the year-on-year growth in output in the last month of 2023 is calculated. As such, all but two of the sectors saw poorer growth performance in December compared to the growth numbers they had posted in November.

The performance of the eight sectors in December is as follows:

>> coal output up 10.6 percent as against 10.9 percent in November

>> crude oil output down 1.0 percent as against a fall of 0.4 percent in November

>> natural gas output up 6.6 percent as against 7.6 percent in November

>> refinery products output up 2.6 percent as against 12.4 percent in November

>> fertiliser output up 5.8 percent as against 3.4 percent in November

>> steel output up 5.9 percent as against 9.4 percent in November

>> cement output up 1.3 percent as against a fall of 4.0 percent in November

>> electricity output up 0.6 percent as against 5.7 percent in November

"The positive aspect was the improvement in cement output with growth of 1.3 percent following the contraction seen in the previous month," pointed out Rajani Sinha, Chief Economist at CareEdge Ratings.

The slower increase in core sector output in December means industrial growth, as per the Index of Industrial Production (IIP), may also cool down as the eight core industries make up more than 40 percent of the weight of the IIP.

Data on the IIP growth for December will be released on February 12.

In November, IIP growth had already slumped to an eight-month low of 2.4 percent from October's 16-month high of 11.6 percent as fewer working days on account of Diwali took a tool on production. With the unfavourable base effect continuing in December too, economists see industrial growth to be muted around 2 percent.