Slowdown Continues: Nov core sector growth contracts by 1.5%

New Delhi: Contraction in India's eight major industries continued for the fourth consecutive month in November as the output pace receded by (-)1.5 per cent.

However, the rate of contraction in November was slower than the sharp plunge of (-)5.8 per cent registered in October.

On a year-on-year basis, the growth rate stood at 3.3 per cent in November 2018.

The eight core industries include coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.

As per the Index of Eight Core Industries, barring refinery products, fertilisers and cement, all other sectors contracted in November.

The ECI comprises over 40 per cent of the weight of items included in the Index of Industrial Production (IIP).

On a sector-specific basis, the refinery output, which has the highest weightage of 28.03, rose by 3.1 per cent in November compared to the same month of the previous financial year.

Nevertheless, electricity generation, which has the second highest weightage of 19.85, decreased by (-)5.7per cent.

Similarly, steel production, the third most important component with a weightage of 17.91, slipped by (-)3.7 per cent during the month under review, whereas coal mining, with 10.33 weightage, was down by (-)2.5 per cent.

Extraction of crude oil, which has a weightage of 8.98, declined by (-)6 per cent in November. The sub-index for natural gas output with a weightage of 6.87 inched lower by (-)6.4 per cent.

On the other hand, cement output, which has a weightage of 5.37, grew by 4.1 per cent, similarly, fertiliser production, which has the least weightage of 2.62, increased 13.6 per cent in November.

"As expected, the contraction in the output of the core industries narrowed significantly to 1.5 per cent in November 2019, reflecting the sequential improvement in 5 of the 8 constituents, namely coal, electricity, cement, fertilizer and refinery products," ICRA Principal Economist Aditi Nayar said.

"While the narrowing in the pace of core sector contraction is encouraging, five of the eight core sectors recorded a YoY decline in November 2019, which paints a sobering picture of the underlying trends."

According to Brickwork Ratings Chief Economic Advisor M.Govinda Rao: "Eight core sectors continued to contract for the fourth straight month signifying the underlying slowdown concerns and demand constraints."

"The core sector growth contracted by 1.5 per cent in November 2019 as against 3.3 per cent growth reported in the corresponding month a year ago. However, there is some improvement in November 2019 as compared to previous month's all-time low of -5.8 per cent."