The year-on-year growth was 5.9% in August and 3.1% in September last year. “The core sector growth for September shows buoyancy in infrastructure where the government has been spending,” said Madan Sabnavis, chief economist at Bank of Baroda. Expenditure on roads has boosted cement demand, while railway outlay has fed into iron and steel output, he added.
Aditi Nayar, chief economist at ratings firm ICRA, said a favourable base supported the core output growth that was the fastest since India moved to the new series. The September reading was the fourth based on the revised index with 2022-23 as the base year, replacing 2011-12. The updated series also includes iron ore, taking the number of core industries to nine.
Refinery products recorded their strongest growth in the new series, rising 10.3% year-on-year in September, up from 5.6% in August. “The rise of refinery output indicates heightened industrial activity as demand for fuel increased, with exports also supporting growth,” said Sabnavis.
Coal production rebounded sharply with 10.7% growth in September, after a contraction of 3.8% in the previous month. Iron ore output rose 18.4% compared with 5.5%. “Coal and iron ore output witnessed a meaningful pickup in their year-on-year growth rates in September compared to August; while this was aided by a low base, the sequential uptick in coal was quite strong, amid low stocks at power plants,” said Nayar.
Electricity generation growth moderated to 11.4% in September from 13.1% in August. Sabnavis said heat waves were contributing to high electricity demand. Steel output grew 4.9%, the fastest pace in three months, compared with 3.5% in August. Cement production rose 9.8%, lower than 11.7% in the month before.
Fertiliser production continued to contract, declining 11.7% year-on-year in September, compared with a 12.4% fall in August. Natural gas and crude oil output also remained in the negative territory, contracting 4.6% and 1.4%, respectively. The oil complex went down as imports dominated, and higher import of fertilisers came in the way of production, said Sabnavis.
The core sector has 40.27% weight in the Index of Industrial Production (IIP). Bank of Baroda projects IIP growth of 7.5-8.5% in September, while ICRA expects it to moderate to 6-7% from 8% in August, as an elevated base is likely to weigh on growth in the non-core segment.