Growth in eight core industries slows down to 0.9% in December

02 Feb 2016 Evaluate

Pointing to a low growth in industrial activity, eight core sectors -- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity, which comprise nearly 38% of the weight of items included in the Index of Industrial Production (IIP), posted tepid growth of 0.9% in December 2015 from 3.2 per cent in the same month of previous year on the back of decline in production of crude oil, natural gas and steel sectors. The December production numbers are, however, better than those in November which witnessed the worst performance in seven months with the output of eight sectors contracting by 1.3 per cent.

According to that data released by the ministry of Commerce and Industry, the combined Index of Eight Core Industries stands at 175.7 in December, 2015, which was 0.9% higher compared to the index of December, 2014. Its cumulative growth during April to December, 2015-16 was 1.9%.

Crude Oil production having weight of 5.22%, decreased by 4.1% in December, 2015 over December, 2014, due to lower global prices that has squeezed out investments from oil exploration and production activities. Its cumulative index during April to December, 2015-16 decreased by 0.8% over the corresponding period of previous year. The Natural gas production with the overall weight of 1.71% contracted 6.1% in December, 2015. Its cumulative index during April to December, 2015-16 declined by 2.7% over the corresponding period of previous year. Steel production having weight of 6.68% declined 4.4% in December, 2015. Its cumulative index during April to December, 2015-16 declined by 1.9% over the corresponding period of previous year. 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.

Meanwhile, Coal production having 4.38% weight increased by 6.1% in December, 2015 over December, 2014. Its cumulative index during April to December, 2015-16 increased by 4.6% over corresponding period of previous year. Petroleum Refinery production having weight 5.94% increased 2.1% in December, 2015. Its cumulative index during April to December, 2015-16 increased by 2.4% over the corresponding period of previous year. Fertilizer production having 1.25% weight increased 13.1% in December, 2015. Its cumulative index during April to December, 2015-16 increased by 10.1% over the corresponding period of previous year.

Cement production having weight of 2.41% increased by 3.2% in December, 2015. Its cumulative index during April to December, 2015-16 increased by 2.2% over the corresponding period of previous year. Electricity generation having weight of 10.32% increased 2.7% in December, 2015. Its cumulative index during April to December, 2015-16 increased 4.0 % over the corresponding period of previous year.

The sluggish performance of the eight core infrastructure industries has continued in the month after hitting seven-month low levels of negative (-) 1.3 per cent in November. The poor growth indicates that industrial production would remain subdued and a stable recovery would take more time to materialise. The slow growth could also push down GDP growth projects for the 2015-16 financial year. The government is hoping for growth to stabilize in the balance period of the fiscal to achieve targeted growth levels.

Growth in eight core industries slows down to 0.9% in December

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