Output growth in the eight major industries rebounded to 2 percent in September 2024 after recording a slight contraction of a revised 1.6 percent in August 2024.

The latest figure, however, is significantly lower than the 9.5 percent growth recorded in September last year.

In the first half of this fiscal year, output in major industries grew by 4.2 percent, lower than the 8.2 percent growth recorded during the same period last year, according to official data published Wednesday by the Ministry of Trade and Industry.

The eight major industries – coal, natural gas, crude oil, refinery products, fertilizer, cement, steel and electricity – account for 40.27 percent of the weight of items included in the Industrial Production Index (IIP).

Positive growth

Five of the eight key sectors were in positive territory for the month under review. The sectors that showed positive growth in September were coal (2.6 percent), refinery products (5.8 percent), fertilizers (1.9 percent), cement (7.1 percent). percent) and steel (1.5 percent).

The three sectors that saw their production decline were crude oil (-3.9 percent), natural gas (-1.3 percent) and electricity (-0.5 percent).

Aditi Nayar, chief economist and head of research and outreach at ICRA, said the mitigation of rainfall-related disruptions in sectors such as mining and power has contributed to the recovery in sector performance base, to growth of 2 percent in September 2024, from the slight contraction of 1.6 percent the previous month.

Notably, cement production growth improved to a six-month high of 7.1 percent in September 2024, following a contraction of 3 percent in August 2024, aided by a favorable base. In contrast, steel production rose only 1.5 percent in the month, the slowest pace in 33 months.

Nayar said ICRA expects the IIP to increase by 3 to 5 percent in September, amid a weaker contraction in power and mining production, as well as a favorable base and a sharp rise in growth in GST electronic invoices (to 18.5 percent in September compared to 12.9 percent in August), supported by pre-festive storage.

“With some changes in the holiday calendar, base effects risk clouding the analysis of how economic growth dynamics will play out over the coming months,” she added.

Moderate activity

Bank of Baroda chief economist Madan Sabnavis said core sector growth was weak in September due to subdued activity and base effects. The decline in power can be attributed to a drop in demand as the monsoon recedes yet to complete, he said.

“The increase in cement production is due to preparations for resumption of construction work after the monsoon. Fertilizer production was positive, although low, indicating that stocks are good. Besides, a late withdrawal of the monsoon is bringing forward rabi sowing. The slowdown in the automobile sector has had an impact on steel production. Petroleum products performed well on increased demand from the export and domestic segments. Industrial growth is expected to remain low, around 1 percent,” he added.

Anubhuti Sahay, head of India economic research at Standard Chartered Bank, said core sector data returned to positive territory after contracting the previous month as the impact of the monsoon on mining coal, cement production and electricity production has faded.

“However, it remains weak compared to the start of the year. We expect better numbers from October onwards,” she added.

At the same time, the Center revised the growth in June’s baseline data to 5 percent. As of July this year, core industries recorded growth of 6.1 percent.

Last month, the government set the final growth rate for May at 6.9 percent.