Barring crude oil, seven of the eight infrastructure industries recorded expansion for a second straight month in January, indicating that a broad-based industrial recovery is probably taking roots.
With this, the core sector performance improved for a third straight month through January, having recovered from a 20-month trough of 0.7% in October 2022, showed the official data released on Tuesday.
Given that these core sectors have a combined weight of 40.3% in the index of industrial production (IIP), the IIP growth in January will likely exceed the December level of 4.3%, said analysts.
India Ratings principal economist Sunil Kumar Sinha expected the core sector to grow at a high single-digit rate in February and March. Power generation, Sinha said, has already witnessed impressive growth of 13.8% until February 27 from a year before. “(Moreover) the remaining months of this fiscal would see many states pushing forward with their planned projects to meet their capex target. This is expected to provide support to the related sectors (like steel and cement),” Sinha said.
Bank of Baroda chief economist Madan Sabnavis said steel and cement growth in January, at 6.2% and 4.6%, respectively, is driven largely by the capex push of the Centre. “With roads, railways and metals segments witnessing traction, this is a good sign for the economy on the investment front,” he added.
Speaking to reporters, chief economic advisor V Anantha Nageswaran cited the strong core sector performance in January to suggest that manufacturing growth in the fourth quarter of this fiscal will remain strong.
Between April and January, the core sector recorded a growth rate of 7.9% from a year before, aided by a favourable base effect and decent performances in some of the months earlier this fiscal.
The recovery in the core sector growth in January is driven by fertiliser (17.9% rise, an eight-month high), coal (13.4%, a seven-month high) and electricity (12%). The growth in natural gas growth hit an eight-month high of 5.3% and refinery products a four-month peak of 4.5%. Of course, the growth in steel and cement output slowed down to a three-month low of 6.2% and 4.6%, respectively, in January. Moreover, crude oil output dropped 1.1% in January, recording its eighth straight month of contraction.