Mirroring slowdown, core sector output shrinks 5.2% in September

Core sector growth in August, earlier expected to be at a three-and-a-half year low, was revised upward to 0.1 per cent from a decline of 0.5 per cent earlier.

This indicates that the country’s economic slowdown may be deepening.

Growth in the eight core sectors of India’s economy declined by 5.2 per cent in September 2019 — a drop that analysts say has not been witnessed so far in either of the two base years used to calculate growth in production of the core sector industries. Overall growth has been hit by declining production in most core sectors except for fertilisers, according to data shared by the Commerce Ministry Thursday. This indicates that the country’s economic slowdown may be deepening.

Core sector growth in August, earlier expected to be at a three-and-a-half year low, was revised upward to 0.1 per cent from a decline of 0.5 per cent earlier. The growth of India’s eight core sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — is a lead indicator of the monthly industrial performance. These sectors had grown by 4.3 per cent in September last, and their cumulative growth during fiscal 2018-19 was 4.4 per cent. The growth in April was recorded at 5.2 per cent, the highest this fiscal so far, before it began to decelerate.

In September, production in refinery products — which make up nearly 30 per cent of the Index of Industrial Production (IIP) — declined 6.7 over the same month in 2018, continuing the mostly negative trend of growth witnessed in May 2019, when de-growth was 1.5 per cent. Coal production, accounting for 10.33 per cent of IIP, fell the most, posting a decline of over 20 per cent in September.

Production in natural gas and cement segments also declined, registering a de-growth of 4.9 per cent and 2.1 per cent, respectively.

Steel production, which accounts for 17.92 per cent, declined 0.3 per cent from 5.1 per cent in August and 13.3 per cent in April.

Growth in the electricity sector, which accounts for nearly 20 per cent of the index, contracted for the second month this year, registering a 3.7 per cent de-growth. In August, de-growth was 0.9 per cent. The crude oil segment maintained a 5.4 per cent de-growth for the second month this fiscal. However, drop in production has slowed since April, when contraction in this sector was over 6 per cent — a trend that continued until July.

Fertilisers was the only segment registering growth. In September, production in this sector was up 5.4 per cent — the highest in FY20.

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“Such a low growth in core sector industries has not been witnessed so far in either 2011-12 base or 2004-05 base series. This clearly indicates the severity of the ongoing industrial slowdown,” said Sunil Kumar Sinha, principal economist, India Ratings and Research.