Led by better show in coal, steel and electricity generation, the eight core industries’ output grew 4.9 per cent in November 2016, the first month of demonetisation.

This was higher than the 0.6 per cent growth seen in November 2015. However, sequentially it was lower than the 6.6 per cent growth recorded in October 2016.

Soumya Kanti Ghosh, Chief Economic Advisor, SBI Group, said that the impact of demonetisation is expected to be different for core sectors and for the Index of Industrial Production (IIP), although the core industries have significant weightage in IIP.

“In core, the demonetisation impact has been little in November. I expect the core sector to fall in a more pronounced way in December due to the impact of demonetisation. I expect the IIP to remain in negative territory for both November and December,” Ghosh told BusinessLine .

For the April-November 2016 period, the output growth of the eight core industries’ — which have 38 per cent weightage in Index for Industrial Production — came in at 4.9 per cent, higher than the 2.5 per cent growth recorded in the same period last year.

Commenting on the latest core data, Devendra Kumar Pant, Chief Economist, India Ratings, said, “As of now, the impact of demonetisation on the core data is visible for the month of November. We are more worried about the informal sectors, where there is more cash usage”.

Demonetisation has impacted the informal segments of the economy more than the formal sectors, he added. Aditi Nayar, Principal economist, ICRA Limited, said that the growth of cement and steel output slowed sharply in November 2016 relative to the previous month, a clear indication of the short-term impact of the note ban on domestic demand in cash-intensive sectors such as construction and real estate.

Data for various lead indicators of economic activity displayed a mixed trend in November 2016, with healthy production in the organised sectors; disruptions in labour/cash-intensive and relatively unorganised sectors resulting in a loss of income for businesses and workers; and deferral of discretionary consumption. While the favourable base effect and healthy production in the core and other organised sectors may support the growth of IIP in November, early evidence of the impact of the note ban on unorganised sectors appears to be negative, Nayar added.

The sequential slowdown in core sector growth in November was modest, with a favourable base effect (owing to fewer holidays relative to November 2015) abating the impact of the note ban in sectors such as electricity and coal, as well as other organised non-core sectors such as automobiles.

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