India’s Core Sector Growth Slumps to 14-Month Low at 3.8% in December 2023

India’s core sector output growth plummeted to a 14-month low of 3.8% YoY in December, as reported by the Ministry of Commerce and Industry. This sharp decline from the previous month’s 7.9% was attributed to a high base and a slowdown in six constituent sectors. Notably, only fertilizers (5.8%) and cement (1.3%) sectors saw an output acceleration in December.

Sectoral Analysis

• Fertilizers and cement recorded growth, while coal, natural gas, refinery products, steel, and electricity witnessed a sequential deceleration.
• Coal sector thrived due to increased mining for heightened winter power demand, while electricity slowed reflecting reduced industrial activity.
• Crude oil production contracted (-1%) for the second consecutive month in December.

Silver Lining and Projections

• Core sector output remained 18.9% higher than pre-Covid levels (February 2020) in December 2023.
• Infrastructure sector recovery persisted, with combined capital outlay of the union and 15 states growing 79.8% YoY to Rs 1.06 trillion.
• Despite the muted December growth, the April-December period recorded a 8.1% growth, slightly surpassing the previous fiscal year’s 8%.

Outlook

• With an unfavorable base, industrial output is anticipated to show muted growth (1-2%) in December, aligning with the moderation seen in core sector growth.

This data underscores the nuanced dynamics impacting India’s economic landscape, with government capex providing crucial support to the infrastructure sector.