Core sector growth slows down to 0.9% in December

The core sector industries posted a tepid growth of 0.9% in December compared to 3.2% in the same month last year, pointing to a low growth in industrial activity.
The core sector disappointment was on the back of a decline in production of crude oil, natural gas and steel sectors. The eight core or infrastructure industries are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.
Aditi Nayar, senior economist, ICRA, said post the base effect-led volatility in October-November last year, the muted 0.9% core sector growth for December is disappointing, particularly as it has fallen short of the average of 1.9% for the first three quarters of 2015-16.
With the trend in global prices weighing upon the viability of domestic production, the contraction in steel output may persist in the near term, and continue to act as a drag upon core sector growth.
Nayar said in line with the trend in the core sector, the IIP Index is likely to post a low growth in December as compared to the contraction in November last year.
Devendra Kumar Pant, chief economist, India Ratings, said after negative growth in November 2015, mild growth provides some relief to industrial output in December. Despite limited private sector mining, Coal India’s efforts have resulted in domestic coal production growth and reducing reliance on imported coal. On the whole, core sector numbers point towards a mild expansion in industrial output in December 2015, he added.
The cumulative growth of core sectors in April-December period of 2015-16 came in at 1.9%, lower than 5.7% in the first nine months of the last financial year.
A Nikkei survey said Indian manufacturing sector growth rose to a four-month high in January driven by rising inflows of new business orders from domestic as well as export clients.
Following the contraction in December in the wake of Chennai floods, January saw the Indian manufacturing sector rebound into expansion territory, as production and new orders recovered, the report said.
The Nikkei India Manufacturing PMI, a composite monthly indicator of manufacturing performance, stood at 51.1 in January, up from 49.1 in December.