Core sector rebounds sharply to grow at 5.4% in November: Govt data

Growth in the output of the core sector, comprising eight infrastructure industries, rebounded sharply in November to increase at 5.4 per cent, owing to a lower base and double-digit expansion in four of the eight areas.

The data released by the industry department on Friday showed sequential acceleration in output growth in sectors like coal (12.3 per cent), steel (10.8 per cent), electricity (12.1 per cent), cement (28.6 per cent), and fertilisers (6.4 per cent).

However, crude oil (-1.1 per cent) and natural gas (-0.7 per cent) production contracted for the sixth and fifth consecutive month, respectively, along with that in refinery products (-9.3 per cent).

Growth in November comes in the wake of the 0.9 per cent increase in October, which was a 20-month low on account of a high base and weak activities.

November core output is significant because it would be the last set of macro data that will be factored in the first advance estimates of GDP, scheduled to be released next week.

Aditi Nayar, chief economist at ICRA, said fewer holidays this November than in the same month last year expectedly improved core sector growth because the base effect also reversed from October.

“Although the index of industrial production (IIP) will also display an improvement to a growth rate of 3-4 per cent in November from the contraction in the previous month, its performance may trail that of the core industries, given the drag imposed by weaker exports,” she added.

The eight core industries account for 40.27 per cent of the weighting of the items included in the IIP.

Devendra Kumar Pant, chief economist at India Ratings & Research, said although the core sector posted good growth in November, the recovery underway was not broad- based.

“We expect the IIP to recover to grow in low single digits in November from the contraction of 4 per cent a month ago”, he added.

The International Monetary Fund (IMF) has projected India’s growth to ease to 6.1 per cent in FY24 from an estimated 6.8 per cent in FY23, reflecting a less favourable global outlook and tighter financial conditions.

The IMF cautioned a sharp global growth slowdown in the near term would affect India through trade and financial channels.

“Intensifying spillovers from the war in Ukraine can cause disruptions in the global food and energy markets, with significant impact on India. Over the medium term, reduced international cooperation can further disrupt trade and increase financial market volatility. Domestically, rising inflation can further dampen domestic demand and impact vulnerable groups,” it added.

However, Fitch Ratings, while reaffirming India’s sovereign rating at the lowest investment grade with a stable outlook, said India was somewhat insulated and hence could be reckoned out of the likely gloomy global scenario in 2023, given its modest reliance on external demand.

“Nevertheless, we expect declining exports, heightened uncertainty and higher interest rates to slow growth to 6.2 per cent in FY24 (from projected 7 per cent in FY23). We also expect consumption growth to moderate as pent-up demand fades,” it added.

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