Slowdown Saga: Core sector growth shrinks by over 5.5%

Last Updated: Sat, Nov 30, 2019 12:53 hrs
MRPL (ANI photo)

New Delhi: Contraction in India's eight major industries continued for the third consecutive month in October as the output pace receded by (-)5.8 per cent.

According to the Index of Eight Core Industries, October's contraction was in line with the sharp plunge of 5.1 per cent registered in September.

On a year-on-year basis, the growth rate stood at 4.8 per cent in October 2018.

The eight core industries include coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.

According to the Index of Eight Core Industries, barring refinery products and fertilisers, all other sectors contracted in October.

The ECI comprises over 40 per cent of the weight of items included in the Index of Industrial Production (IIP).

On a sector-specific basis, the refinery output, which has the highest weightage of 28.03, inched up by 0.4 per cent in October compared to the same month of the previous financial year.

However, electricity generation, which has the second highest weightage of 19.85, decreased by 12.4 per cent.

Similarly, steel production, the third most important component with a weightage of 17.91, slipped by 1.6 per cent during the month under review, whereas coal mining, with 10.33 weightage, was down by 17.6 per cent.

Extraction of crude oil, which has a weightage of 8.98, declined by 5.1 per cent in October. The sub-index for natural gas output with a weightage of 6.87 inched lower by 5.7 per cent.

Cement output, which has a weightage of 5.37, fell 7.7 per cent, whereas fertiliser production, which has the least weightage of 2.62, increased 11.8 per cent in October.

"Overall, six of the eight constituents of the core sector displayed a YoY decline in October 2019, partly on account of disruption caused by heavy rainfall, as well as fewer working days related to the festive season," ICRA Principal Economist Aditi Nayar said.

"Based on the unfavourable performance of the core sector, the contraction in the IIP appears set to deepen in October 2019, even as other indicators of demand such as petrol and ATF consumption have recorded an improved performance in that month," Nayar added.