Core sector growth back in black, cement leads

NEW DELHI: Growth in the country’s core sector staged a comeback in September as five of the eight sectors, led by cement, displayed strength during the month after contracting to a 42-month low in Aug.
Data released by the commerce and industry ministry on Wednesday showed the eight core sectors, spanning coal, crude oil, natural gas, refinery products, fertilisers, steel, electricity, grew by 2% in Sept compared with a contraction of 1.6% in Aug but below 9.5% recorded in Sept 2023. Between April-Sept the sector grew by 4.2%, slower than the 8.2% in the year-ago period. The cement sector made a robust comeback, with production rising to six-month high of 7.1% during the month after 3.1% contraction in Aug.
The sector accounts for nearly 40% of the index of industrial production (IIP) and growth in the core sector adds to strength of IIP data, which will be released later next month.
“Easing of disruption related to rainfall on sectors like mining and electricity contributed to turnaround in the core sector’s performance to a growth of 2% in Sept from mild contraction of 1.6% in the previous month. The disaggregated trends are relatively healthy, with a sequential improvement in the year-on-year growth of five of the eight sectors,” said Aditi Nayar, chief economist at ratings agency Icra.
“We project IIP to grow by 3-5% in Sept, amid a narrower contraction in electricity and mining output, as well as a favourable base and a sharp uptick in growth in GST e-way bills (to 18.5% in Sep 2024 from 12.9% in Aug 2024), supported by pre-festive stocking. With some shifts in festive calendar, base effects are likely to obfuscate an analysis of how the economic growth momentum is unfolding over next few months,” said Nayar.
Separate data showed the Centre’s fiscal deficit at Sept-end narrowed to 29.4% of 2024-25 fiscal year target. It was at 39.3% of the full year target in 2023-24. The fiscal situation was boosted by robust tax revenues.
“Govt’s fiscal deficit declined to Rs 4.7 trillion or 29% of FY2025 budget estimates in H1 FY2025, from Rs 7 trillion in April-Sept FY2024, aided by RBI’s dividend payment in the early part of the fiscal as well as the continuing year-on-year contraction in capital expenditure,” said Nayar.