India’s Core Sector Output Contracts For Fourth Straight Month In November, But At A Slower Pace

India’s core sector output contracted for the fourth straight month in November but the pace of deceleration was slower.

The index of eight core sector industries—that form about 40 percent of the Index of Industrial Production—fell 1.5 percent in November, according to data released by the Ministry of Commerce and Industry on Tuesday. On a cumulative basis, the index was flat from April to November 2019 compared to a growth of 5.1 percent in the previous year.

The contraction in core sector output narrowed significantly, reflecting the sequential improvement in five of the eight constituents, namely coal, electricity, cement, fertiliser and refinery products, said Aditi Nayar, principal economist at ICRA Ltd.

While the slower pace of contraction is encouraging, according to Nayar, five of the eight core sectors recorded a year-on-year decline in November, painting a “sobering picture of the underlying trends”.

“With an improvement in the performance of a number of lead indicators, including the core sector industries, auto production and non-oil merchandise exports, we expect the Index of Industrial Production to report a modest growth in November 2019 after having contracted since September 2019,” Nayar said.

Five of the eight sectors within the index saw a contraction in November.

• Coal output contracted 2.5 percent in November compared to a contraction of 17.6 percent in October.
• Crude oil output fell 6 percent after a contraction of 5.1 percent in the previous month.
• Natural gas output contracted 6.4 percent in November after falling 5.7 percent a month earlier.
• Refinery products, with highest weight in the core sector index at 28 percent, grew 3.1 percent in November compared to 0.4 percent gorwth in the previous month.
• Fertilisers continued to show a relatively strong growth, with output rising 13.6 percent as against 11.8 percent growth in October.
• Steel output contracted 3.7 percent after contracting 1.9 percent in October.
• Cement output grew 4.1 percent in November after declining 7.7 percent the previous month.
• Electricity production fell 5.7 percent in November as against 12.2 percent in the previous month.

Devendra Pant, chief economist at India Ratings and Research, said the contraction of electricity output for four consecutive months, particularly reflected the state of the economy.