India’s core sector output, which measures production by eight key industries, grew by 3.6 per cent in January, a 15-month low, as per a government data update. A lower growth of 0.7 per cent was recorded in October 2022.

       The base effect combined with a single digit growth in five industries and a negative growth in two, slowed down production in the first month of this year. In January last year, the core sector had grown by 9.7 per cent.

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       Figures for December were revised upwards from 3.8 per cent to 4.9 per cent.

       Madan Sabnavis, chief economist, Bank of Baroda says the January figures were a “mixed bag.”

       Coal output grew by 10.2 per cent, the only sector to retain a double-digit growth in January, compared to 10.7 per cent previously.

       Sabnavis said the growth in coal is a reflection of a “steady demand for power from business and households.”

       “In fact with winter being quite severe in Jan the demand for heating has gone up,” he said.

       While refinery products slowed down by -4.3 per cent, fertilisers did so by -0.6 per cent, its lowest growth since February 2022. Crude oil grew by 0.7 per cent in January after a negative growth in the two previous months.

       “The oil sector has disappointed with refinery products witnessing a drop of 4.3% with exports being one factor. Domestic demand was steady,” Sabnavis explained.

       Meanwhile, production in the natural gas sector grew by 5.5 per cent, steel by 7 per cent, cement by 5.6 per cent and electricity by 5.2 per cent.

       Sabnavis said “The good part is that cement and steel which are reflective of government capex witnessed fairly good growth of 7 per cent and 5.6 per cent notwithstanding the high base effect. But the not-so-good news was that overall growth was just 3.6 per cent.”

       Core sector output in the 10-months of this financial year (FY24) grew by 7.7 per cent compared to 8.3 per cent for the same period in FY23.

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       The core sector figures assume importance as they account for 40.27 per cent of the weight in the Index of Industrial Production (IIP) which is an important metric that measures production output.

       Aditi Nayar, chief economist, head research and outreach at ICRA Limited said “With a relatively healthier trend displayed by various other high frequency indicators, we project the IIP to report a growth of 2-4% in January 2024.”

       Sabnavis also expects the IIP growth to be between 2-3 per cent and said, “We do not expect any resurgence in consumer goods production this month."