Portending a sharp dip in IIP growth, the eight core industries’ output in November contracted 1.3 per cent.
The latest Core industries’ print – reflecting patchy nature of economic recovery – was substantially lower than the 3.2 per cent growth seen in October this year and 8.5 per cent growth recorded in November last year.
A large part of the “unsurprising” contraction in the eight core industries’ output could be attributed to fewer number of working days in November this year. A shift in festive calendar also led to the downturn in output in several sectors.
The eight core industries – coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity – have weightage of about 38 per cent in the index of industrial production. IIP had recorded 9.8 per cent growth in October. While electricity output remained flat for the month under review, there was contraction in important sectors like steel (-8.4 per cent), crude oil (-3.3 per cent), natural gas (-3.9 per cent) and cement (- 1.8 per cent).
Fertilizers output saw a robust growth at 13.5 per cent, while coal and refinery products output grew 3.5 per cent and 2.5 per cent respectively.
Closed factories during the festive season also dampened the demand for electricity in November 2015, resulting in negligible generation growth in that month post robust expansion in September-October 2015, said Aditi Nayar, Senior Economist, ICRA Ltd, a credit rating agency.
“Given the variations in the number of working days, assessing the combined growth for October-November 2015 as compared to the same months in 2014 would offer greater insight regarding the industrial outlook for the second half of FY16,” she said.
In ICRA’s view, the continuing sluggishness in exports and rural demand, the narrow recovery in infrastructure and the relatively brighter outlook for urban demand continue to point towards moderate industrial growth in second half of 2015-16.