India's core infrastructure sectors registered their weakest performance in 14 months during March 2024, with growth nearly stagnating at just 0.1 percent compared to the same period last year. This alarming slowdown in the eight key industries that form the backbone of the nation's industrial production has raised concerns about broader economic momentum.
March Performance: Sector-by-Sector Analysis
The latest data released by the Ministry of Commerce and Industry reveals a mixed performance across different core sectors. Coal production witnessed a significant decline of 8.7 percent in March 2024 compared to the same month last year, representing one of the steepest drops among the eight core industries. Similarly, natural gas output decreased by 6.3 percent, reflecting ongoing challenges in the energy sector.
On a more positive note, refinery products showed modest growth of 2.7 percent, while fertilizer production increased by 4.9 percent. Steel sector performance remained relatively stable with a 1.5 percent growth, and cement production edged up by 1.1 percent. Electricity generation recorded a marginal increase of 2.0 percent during the same period.
The crude oil sector continued to struggle, posting a decline of 2.4 percent in March, maintaining its trend of negative growth that has persisted for several months. This persistent underperformance in crude oil production remains a concern for India's energy security and import dependency.
Quarterly and Fiscal Year Performance
When examining the broader picture, the core sector growth for the entire fiscal year 2023-24 stood at 7.5 percent, significantly lower than the 7.8 percent expansion recorded in the previous financial year. The January-March quarter of 2024 proved particularly challenging, with average growth slowing to just 5.2 percent compared to 7.5 percent in the preceding October-December quarter.
The cumulative index of eight core industries for the full fiscal year 2023-24 showed an increase of 7.6 percent compared to the corresponding period of the previous year. However, this aggregate figure masks the significant slowdown observed in the final quarter, particularly the near-zero growth in March.
February's growth rate, initially estimated at 6.7 percent, was subsequently revised downward, indicating that the slowdown trend had been building momentum in the preceding months. This revision suggests that the March stagnation represents the culmination of a gradual deceleration rather than an abrupt collapse.
Broader Economic Implications
The poor performance of core industries has significant implications for India's overall industrial production, as these eight sectors account for approximately 40.27 percent of the weight in the Index of Industrial Production (IIP). The near-stagnation in March suggests that the broader industrial output figures for the month could reflect similar weakness.
Economists are particularly concerned about the sequential slowdown visible throughout the fourth quarter. The decline from 7.5 percent growth in Q3 to 5.2 percent in Q4 indicates weakening industrial momentum as the fiscal year concluded. This trend could potentially affect GDP growth estimates for the January-March quarter.
The specific sectors showing contraction—coal, natural gas, and crude oil—point to ongoing challenges in India's energy infrastructure. These declines come at a time when the country is striving to enhance domestic production to reduce import dependency and strengthen energy security.
Looking ahead, policymakers and industry stakeholders will be closely monitoring whether this March performance represents a temporary setback or the beginning of a more sustained slowdown. The upcoming months' data will be crucial in determining appropriate policy responses to reinvigorate growth in these critical infrastructure sectors that form the foundation of India's economic development.
