Output levels in India’s eight core sectors, which account for about 40% of the country’s industrial production, continued to drag in September with the Index of Core Industries (ICI) falling to a ten-month low of 154.8. That is 0.83% below the index’s August levels.

On a year-on-year basis, however, core industries’ output recorded a 2% uptick, reflecting a moderate but positive turnaround from August, when the index had contracted 1.6%, the first such shrinkage in 36 months.

Steel down, cement up

Fortunes were mixed for the two key construction-related sectors, with steel output growth hitting a 33-month nadir of 1.5% in September, while cement production rose 7.1%, the fastest in six months.

Noting that steel output may have got dented by the automobile sector’s sales woes, Bank of Baroda chief economist Madan Sabnavis reckoned that industrial output in September may remain weak, with a growth rate of under 1%.

The Index of Industrial Production (IIP) had contracted marginally in August, the first such occasion since October 2022. The National Statistical Office will release September’s IIP numbers on November 12.

Acuité Ratings chief economist Suman Chowdhury, who expects core sectors to grow 4.5% to 5% through 2024-25, compared to 7.6% last year, said this will also drag drown industrial output growth to 5%. The economic indicators for the second quarter have increased the downside risks to their 7% growth projection for the year, he noted.

Power, oil and gas

Five of the eight infrastructure sectors recorded year-on-year growth, compared to just two sectors in August. However, just three sectors’ production levels were also higher than August: coal (up 9.8%), cement (0.85%), and refinery products, which recorded a fractional 0.07% uptick sequentially.

Electricity generation contracted for the second month in a row, albeit with a milder shrinkage of 0.5% from September 2023. However, this was 3.5% below August’s generation level, perhaps linked to the late withdrawal of the monsoon with above normal rains in September.

Crude oil production contracted for the fifth successive month, with the shrinkage deepening to 3.9%, while natural gas declined 1.3%, the third straight month of contraction. Absolute output levels in both these sectors were at a three-month low.

Fertilizer production growth hit a four-month low of 1.9%, with volumes the lowest since this July. Mr. Sabnavis linked this to adequate stocks and the late monsoon pushing Rabi sowing forward.

ICRA chief economist Aditi Nayar reckoned that industrial output may have grown in the range of 3% to 5% in September, thanks to narrower contractions in electricity and mining output, higher growth in GST e-way bills, as well as a favourable base from last year.