Lower oil and natural gas production decelerate September core factory output

Last Updated: Thu, Nov 01, 2018 11:50 hrs
Mobile Phone manufacturing Unit (Twitter image)

New Delhi: The output of India's eight major industries slowed in September to 4.3 per cent, official data showed on Wednesday.

As per a Ministry of Commerce & Industry statement, the Index of Eight Core Industries (ECI) had risen by 4.7 per cent in August and 4.7 per cent in September 2017.

"The combined Index of Eight Core Industries stood at 127.2 in September, 2018, which was 4.3 per cent higher as compared to the index of September, 2017. Its cumulative growth during April to September, 2018-19 was 5.5 per cent," the ministry said in a statement.

The ECI index represents major sectors like coal, steel, cement and electricity. It carries 40.27 per cent weightage of the Index of Industrial Production (IIP), which is the macro gauge for India's factory output.

On a sector-specific basis, refinery products, which has the highest weightage of 28.03 per cent, inched up by 2.5 per cent in September 2018 compared with the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85, picked up by 8.2 per cent.

Steel production, the third most important component with weightage of 17.92, was up by 3.2 per cent during the month under review, whereas coal mining, with a 10.33 weightage, edged higher by 6.4 per cent.

On the other hand, extraction of crude oil, which has an 8.98 weightage, declined by (-) 4.2 per cent during the month under consideration.

The sub-index for natural gas output, with a weightage of 6.88, slipped by (-) 1.8 per cent.

Cement production, which has a weightage of 5.37, edged higher by 11.8 per cent in July 2018.

Fertiliser manufacturing, which has the least weightage -- only 2.63 -- was up by 2.5 per cent during the month under review.

"The decline in the core sector growth in September 2018 relative to the previous month was mild albeit broad-based, led by refinery products, cement, crude oil, natural gas and steel," said Aditi Nayar, Principal Economist, ICRA.

"In line with the previous month, two of the eight constituents recorded a YoY contraction in September 2018, which remains a cause for some concern."

According to Nayar, given the overhang related to the dip in the growth of core sector output, contraction in non-oil merchandise exports, impact of floods in some parts of the country, and the distortion related to a later start to the festive season in 2018 compared to 2017, industrial growth is likely to display a muted base-effect led pickup at best in September 2018, from the modest level in August 2018.

Industry body Assocham said the slowdown in core IIP performance will have additional impact on overall industrial production which will not impact favourably for India's economic growth and employment generation.

"The decline in core IIP could be the result of higher import tariffs and depreciating currency which is impacting production costs and leading to lower production," Assocham said in a statement.

"This indicates moderate decline in overall demand of industrial inputs."



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