Lower demand post festive season sequentially eases India’s Nov core sector growth

Lower demand after the festive season amidst supply disruptions in parts of southern India due to heavy rainfall, eased the growth rate of India’s eight major industries in November, on a sequential basis.

The Index of Eight Core Industries’ (ICI) readings for last month showed a slower rate of expansion at 3.1 per cent (provisional) from a rise of 8.4 per cent (provisional) reported for October 2021.

However, on a year-on-year basis, the ICI reading during the period under review was higher than (-) 1.1 per cent reported for November 2020.

The ICI index comprises 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP), comprising coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity.

“The production of coal, natural gas, refinery products, fertilisers, steel and electricity industries increased in November 2021 over the corresponding period of last year,” a Ministry of Commerce and Industry statement said.

“Final growth rate of Index of Eight Core Industries for August 2021 is revised to 12.2 per cent from its provisional level 11.6 per cent. The growth rate of ICI during April-November 2021-22 was 13.7 per cent (P) as compared to the corresponding period of last FY.”

On a sector-specific basis, the output of coal, which has a weightage of 10.33 per cent in the index, showed a growth of 8.2 per cent in November 2021 over the same month of the previous year.

Similarly, the output of refinery products, which has the highest weightage of 28.04 per cent, rose by 4.3 per cent, compared to the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85 per cent, inched up by just 1.5 per cent, whereas steel production was up by just 0.8 per cent last month.

However, the extraction of crude oil, which has a weightage of 8.98 per cent, declined by 2.2 per cent during the month under consideration, though the sub-index for natural gas output, with a weightage of 6.88 per cent, rose by 23.7 per cent.

Cement production, which has a weightage of 5.37 per cent, declined by 3.2 per cent in the month under review.

Fertiliser manufacturing, which has the least weightage — only 2.63 per cent — increased by 2.5 per cent.

ICRA Chief Economist Aditi Nayar said: “Core sector growth deflated to a lower than expected 3.1 per cent in November 2021 from the revised 8.4 per cent in October 2021, adding further evidence that the momentum slackened after the festive season amidst supply disruptions in parts of southern India related to heavy rainfall.

“The slowdown was pervasive across six of the eight core sectors, with cement output slipping into a YoY contraction. Moreover, the YoY growth of only fertiliser output recorded a rise in November 2021 relative to the previous month, as rabi sowing progressed.”

20211231-233801

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