Core sector output recovers, grows 0.9 per cent in Dec.

Fertiliser, coal, cement output and electricity production contribute

ore sector output returned to positive territory in December 2015 by registering a 0.9 per cent growth after shrinking (-) 1.3 per cent in November last year but was still much lower than 3.2 per cent growth recorded in December 2014.

The output of eight core industries — that comprise almost 38 per cent of the weight of items included in the Index of Industrial Production (IIP) — could record only a 0.9 per cent growth in December last year due to 4.1 per cent contraction in output of crude oil ( the fourth consecutive month in the negative territory), 6.1 per cent contraction in natural gas ( falling for the third successive month) and 4.4 per cent shrinkage in steel ( falling for the sixth consecutive month).

“Data on the core infrastructure industries has clearly been disappointing as growth remained sub one per cent in December after a negative blip in November,” said Rishi Shah, economist at Deloitte India. “Cement production has improved and is likely to continue growing as road projects pick up pace. But overall, growth in the core sector is likely to remain low in the coming months till the time the overall investment scenario improves.”

During April-December 2015 period this fiscal, the output of these eight sectors slowed to a 1.9 per cent growth from 5.7 per cent growth in the same period last fiscal. In 2014-15, these sectors had grown by 4.4 per cent, according to the data released on Monday by the Commerce and Industry Ministry. The core sector growth had registered the steepest fall in over a decade when it shockingly shrank 1.3 per cent in November 2015 compared to the same month a year ago. The December 2015 data comes a day before the RBI’s monetary policy review meeting. Despite concerns on the growth front, the central bank is expected to leave the key policy rates unchanged as it would wait for the government to bring in fiscal consolidation measures in the forthcoming union budget.

The central bank would also keep an eye on retail inflation which has seen an uptick in the December quarter (5.6 per cent) from the September quarter (3.9 per cent).

In December, fertiliser output registered double digit growth for the fifth successive month with 13.1 per cent growth while coal production grew by 6.1 per cent (up from 3.5 per cent in November). Cement output increased by 3.2 per cent (up from -1.8 per cent in November).

Electricity production also grew by 2.7 per cent (from flat growth in November, and has been in the positive growth territory this fiscal barring April 2015), while refinery products grew by 2.1 per cent (up from 2.5 per cent in November.

In December 2014, the growth in output of coal was 7.5 per cent, crude oil (-1.4 per cent), natural gas (-2.9 per cent), refinery products (6.1 per cent), fertilisers (-1.6 per cent), steel (flat growth), cement (3.8 per cent) and electricity (4.8 per cent).