Core sector output at 10-month low in September, deepening growth anxieties

India's core sector output levels in September show mixed growth, with steel down but cement up. Industrial output remains weak.

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.

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.

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.