Eight core industries’ output growth slows to 2.6% in Dec 2018

K.R. Srivats New Delhi | Updated on January 31, 2019

Result of decline in crude oil, refinery products and fertiliser production

The eight core industries’ output growth fell for the second straight month to touch 2.6 per cent in December 2018.

This was lower than both the 3.8 per cent growth recorded in December 2017 and the 3.4 per cent growth print seen in November 2018, official data released on Thursday showed.

For the April-December 2018 period, the core industries’ output grew 4.8 per cent, much higher than the 3.9 per cent growth recorded in the same period in the previous year.

The eight core industries are coal, crude oil, natural gas, refinery products, fertilisers, steel and cement. Steel and cement continue to be the leading sectors, with double digit growth at 13.2 per cent and 11.6 per cent respectively in December 2018.

This can be attributed to government spending. It needs to be seen if this is sustained in the light of fiscal pressures where cuts could get invoked in capex, Madan Sabnavis, Chief Economist, CARE Ratings told BusinessLine. In December 2017, steel sector output grew 0.4 per cent, while cement output recorded 17.7 per cent growth.

While coal sector output grew 0.9 per cent, crude oil output contracted 4.3 per cent. Natural gas output was up 4.2 per cent and electricity output grew 4 per cent in December 2018. Refinery products and fertiliser output contracted 4.8 per cent and 2.4 per cent respectively during the month under review.

The energy complex performance has not been up to the mark, which can be attributed to lower crude oil prices, which impacts crude oil production as well as exports of refinery products, according to Sabnavis.

Import of fertilisers has to an extent kept domestic production down over the last few months. Also, economies effected by farmers in usage have had an impact at the margin, he said.

Both power and coal production have witnessed slower growth as the initial impetus of some government schemes has tapered. Imports of coal have also been higher, which have replaced domestic production.

Given this trend in core data, the index of industrial production (IIP) growth for December 2018 is likely to be in the 2.5 per cent range with a downward bias given the high base effect, he said.

Published on January 31, 2019

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