CARE Ratings reviews the index of eight core infrastructure industries. During the first half of this fiscal year, the eight core industries production grew by 1.3 per cent, 4.2 per cent lower than that in the comparable period a year ago.

The index of eight core infrastructure industries contracted sharply by 5.2 per cent in September 2019 (its lowest level since the beginning of the new base year (2011-12)). Deterioration in seven of the eight constituents weighed on the overall core sector growth with production of coal having declined by 21 per cent (highest among the constituents).

At the same time, higher production of fertilizers owing to restocking activities ahead of rabi season limited the decline in the core sector index. The core sector growth for August 2019 was revised upwards to 0.1 per cent from the earlier contraction of -0.5 per cent. During the first half of this fiscal year, the eight core industries production grew by 1.3 per cent, 4.2 per cent lower than that in the comparable period a year ago.

Industry-wise growth
Coal production contracted sharply by 21 per cent in September 2019 over a contraction of 8.6 per cent in the previous month and growth of 6.4 per cent in September 2018. Prolonged monsoons have weighed on the coal production.
Cement production contracted for the second consecutive month by 2.1 per cent over the 5.1 per cent contraction in the previous month and 11.8 per cent growth in the comparable period a year ago. Unfavourable base effect and prolonged monsoon weighed on the cement production during the month.
Steel production fell to a nearly 4 year low of (-) 0.3 per cent over the 5 per cent growth in the previous month and 3.2 per cent growth in the corresponding period a year ago. This can be attributed to slowdown in demand from the end user industries owing to monsoons.
Electricity production continued to witness contraction in this month as well.
It declined by 3.7 per cent as against the 0.9 per cent contraction in the previous month. High base effect and lower commercial demand given the low industrial growth has led to lower electricity production.
Refinery products, having the highest weight of 28 per cent, contracted by 6.7 per cent as against the positive growth of 2.6 per cent in the previous month and 2.5 per cent in September 2018. Planned shutdowns for upgradation and maintenance along with inventory pile up of refinery products and extended monsoons came in the way of refinery production.
Growth in fertilizer production rose to an eight-month high of 5.4 per cent during September 2019, higher than the 2.9 per cent growth in August 2019 and 2.5 per cent growth in the corresponding period a year ago. Restocking activities ahead of the rabi sowing season supported the fertilizer production.
Crude oil production contracted by 5.4 per cent in September 2019, same as of last month.
Natural gas contracted to a 14-month low at 4.9 per cent in September 2019 as against the 3.9 per cent contraction in the previous month and 1.7 per cent contraction in the comparable period a year ago.

CARE Ratings’ view
Negative growth in IIP cannot be ruled out in September 2019 given that the core sector has contracted sharply and it constitutes 40 per cent of items included in IIP.

For further information:
Madan Sabnavis, Chief Economist
Email: madan.sabnavis@careratings.com
Tel: 91-22-68374433

Manisha Sachdeva, Economist
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Tel: 91-22-68374346
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Disclaimer: This report is prepared by CARE
Ratings Ltd. CARE Ratings has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE Ratings has no financial liability whatsoever to the user of this report.
Source: CARE Ratings’ Core Sector
September 2019 report