India's core infrastructure sectors returned to growth in November, expanding by 1.8% after a contraction in the previous month. Official data released by the Ministry of Commerce and Industry on Monday showed a recovery driven by robust output in fertilizers, steel, coal, and cement, which helped counter ongoing weakness in oil and gas-related sectors.
Key Drivers of November's Growth
The standout performer was the cement industry, where production surged by a significant 14.5% during the month. Steel output also showed strong momentum, expanding by 6.1%. The fertilizers sector recorded a healthy growth of 5.6%, while coal production increased by 2.1%.
This collective strength in four key sectors was crucial in pulling the overall index into positive territory. Economists point to sustained government spending on infrastructure projects as a primary catalyst. Madan Sabnavis, chief economist at Bank of Baroda, highlighted that the push to infrastructure creation in both roads and housing has significantly contributed to the growth in cement and steel.
Persistent Weakness in Energy Sectors
Despite the overall growth, the expansion remained modest due to continued contractions in energy-related industries. Output of crude oil, natural gas, and refinery products all declined in November, acting as a drag on the broader core sector performance.
Sabnavis explained that low global oil prices have dampened domestic production incentives due to associated costs. Furthermore, electricity generation declined by 2.2%, a dip that could reflect weaker demand linked to an earlier-than-usual onset of winter.
Context and Economic Implications
The November growth figure of 1.8% compares with a much higher expansion of 5.8% in the same month last year, indicating a strong base effect. For the April-November period of the current fiscal year, the cumulative core sector output has grown by 2.4% year-on-year.
These eight core industries—coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity—hold substantial weight, accounting for more than two-fifths of India's total industrial output. Their performance is a key leading indicator for the Index of Industrial Production (IIP). Sabnavis estimates that based on this core sector data, overall industrial production may have expanded in the range of 2.5% to 3% in November.
This rebound follows a challenging October, where industrial production growth had slowed to 0.4%, its weakest pace in 14 months, as manufacturing decelerated and mining and electricity output contracted. The November core sector data, therefore, provides a tentative sign of stabilization in the industrial economy, albeit with clear sectoral divergences.
