Aided by an expansion in steel, fertilisers and electricity sectors, the eight core industries output grew 0.1 per cent in January 2021. However, this was lower than the 0.2 per cent growth seen in December 2020 and 2.2 per cent growth seen in January last year.
For the month under review, five of the eight core industries has seen a contraction. Also, the December 2020 overall core sector performance has been upwardly revised to 0.2 per cent growth from the contraction of 1.3 per cent earlier.
This anaemic growth of 0.1 per cent in January is a concern as it has a weight of nearly 40 per cent in the Index of Industrial Production (IIP) and reflects physical production that has now declined by 8.8 per cent for the year, Madan Sabnavis, Chief Economist, CARE Ratings, told BusinessLine.
“IIP growth for the month can be expected to be positive but less than 1 per cent provided support given by consumer-oriented industries,” he said.
While steel output has expanded at a steady pace at 2.6 per cent for the second consecutive month, the pace of contraction in cement production eased in January to 5.9 per cent from 7.2 per cent in the previous month.
An unfavourable base effect underpinned coal's deterioration into a contraction of 1.8 per cent in January 2021 from the 2.2 per cent growth in December 2020.
The eight core industries are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.
Aditi Nayar, Principal Economist, ICRA said: “Based on the available data for the core sector, merchandise exports and auto output, we project the growth in the Index of Industrial Production to remain subdued at 0.5-1.5 per cent in January 2021.”
Sabnavis highlighted that cement has now de-grown for three months which is disappointing as this reflects developments in the construction sector that was expected to pick up. Quite clearly, the real estate sector's mood has not recovered as the focus is on disposing of inventory rather than going in for new projects, he said.