Capex and spending double engine: Core strong; car dispatches hit a fresh high

India's infrastructure sector closed the September quarter on a firm note, while frantic festive demand lifted automobile dispatches to yet another record in October, highlighting the twin drivers of the economy - government capital expenditure and high-end consumption.

The Index of Eight Core Industries rose 8.1% in September from a year earlier, with coal, steel and electricity posting robust growth, data released on Tuesday showed. It rose 8.4% in July and 12.5% in August, marking a strong quarter despite September growth slipping to a 4-month low.

Nearly 50% capex done
Separately, data compiled by ET showed carmakers in India are estimated to have dispatched a record 380,000-385,000 units during October, surpassing the September high of 362,000. This would imply 14.5% annual growth from a year earlier, the highest in more than a year.

A strong October lifted dispatches for the first 10 months to 3.45 million units, a growth of 9% on-year.

Government expenditure data released on Tuesday showed the government has already spent nearly 50% of its Rs 10 lakh crore capital expenditure budget for FY24, providing crucial support to the economy. Additionally, high-end purchases of white goods and cars have provided a consumption boost.


Core index
The core index measures the output of eight key infrastructure sectors - coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. It has a 40% weight in the Index of Industrial Production (IIP).

"A pickup in rainfall expectedly flattened the core sector expansion in September to a four-month low of 8.1%, from 12.5% in August, amid the slowdown in growth of seven of the eight constituent sectors, barring fertiliser output," said Aditi Nayar, chief economist, Icra.

Coal (16.1%), electricity (9.3%), steel (9.6%) and natural gas (6.5%) posted strong growth in September. Cement output expanded 4.7% in September, slipping sharply from 19.3% in the preceding month. Crude oil output shrank 0.4%, refinery products production grew 6.5%, while fertiliser manufacture was up 5.5%.

Sequentially, the eight infrastructure sectors witnessed a 4.76% contraction in growth from August. In September 2022, core sector growth was 8.3%.

The slightly lower core sector growth may dampen industrial production growth in September from 10.3% in August. "IIP growth is likely to moderate to high single digits in September, taking a cue from the core sector's trajectory," said Nayar.