Core Sector Growth Slows To 14-Month Low Of 3.8 Per Cent In December Due To High Base

The core sector (coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity) growth in November was 7.9 per cent. It was 8.3 per cent in December 2022

The growth in output of eight key infrastructure industries, also known as the core sector, declined to a 14-month low of 3.8 per cent in December, down from 7.9 per cent in November, due to high base and a moderation in the growth of six constituent sectors, according to the official data released on Wednesday. In December last year, the core sector output had grown by 8.3 per cent.

The core sector (coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity) growth in November was 7.9 per cent. It was 8.3 per cent in December 2022. The last low was recorded at 0.9 per cent in October 2022. These numbers assume significance as the eight core sectors contribute 40.27 per cent to the Index of Industrial Production (IIP).

The growth of eight sectors was flat at 8.1 per cent year-on-year in the April-December 2023-24. The growth rate in the production of coal, refinery products, fertiliser, steel, cement and electricity decelerated during December 2023.

Only natural gas output rose by 6.6 per cent during the month under review from 2.6 per cent in December 2022. 

Production of crude oil fell by 1 per cent in December last year. The growth rate in the production of electricity, steel and cement slowed to 0.6 per cent, 5.9 per cent and 1.3 per cent in December 2023 against 10.4 per cent, 12.3 per cent and 9.5 per cent, respectively, in December 2022.

Aditi Nayar, chief economist, head, Research & Outreach, ICRA Ltd, said the core sector expansion halved to a 14-month low. "Following the tepid core sector growth in December 2023, we project the IIP (Index of Industrial Production) expansion for that month at a bleak 1-3 per cent," she said. 

The summary of the Index of Eight Core Industries:

Cement: Cement production (weight: 5.37 per cent) increased by 1.3 per cent in December, 2023 over December, 2022. Its cumulative index increased by 9.2 per cent during April to December, 2023-24 over corresponding period of the previous year.

Coal: Coal production (weight: 10.33 per cent) increased by 10.6 per cent in December, 2023 over December, 2022. Its cumulative index increased by 12.5 per cent during April to December, 2023-24 over corresponding period of the previous year.

Crude Oil: Crude Oil production (weight: 8.98 per cent) decreased by 1.0 per cent in December, 2023 over December, 2022. Its cumulative index declined by 0.3 per cent during April to December, 2023-24 over corresponding period of the previous year.

Electricity: Electricity generation (weight: 19.85 per cent) increased by 0.6 per cent in December, 2023 over December, 2022. Its cumulative index increased by 6.9 per cent during April to December, 2023-24 over corresponding period of the previous year.

Fertilizers: Fertilizer production (weight: 2.63 per cent) increased by 5.8 per cent in December, 2023 over December, 2022. Its cumulative index increased by 6.2 per cent during April to December, 2023-24 over corresponding period of the previous year.

Natural Gas: Natural Gas production (weight: 6.88 per cent) increased by 6.6 per cent in December, 2023 over December, 2022. Its cumulative index increased by 5.6 per cent during April to December, 2023-24 over corresponding period of the previous year.

Petroleum Refinery Products: Petroleum Refinery production (weight: 28.04 per cent) increased by 2.6 per cent in December, 2023 over December, 2022. Its cumulative index increased by 4.7 per cent during April to December, 2023-24 over corresponding period of the previous year.

Steel: Steel production (weight: 17.92 per cent) increased by 5.9 per cent in December, 2023 over December, 2022. Its cumulative index increased by 13.3 per cent during April to December, 2023-24 over corresponding period of the previous year.