Core Sector Output Growth Eases to 5.4% in July, Official Data Shows

Growth in India's nine key infrastructure sectors eased to 5.4 per cent in July, down from 6 per cent in the previous month of June, according to official data for the Index of Core Industries (ICI) released on Thursday. In the corresponding month of the previous year, the growth rate stood at 3.2 per cent.

The core infrastructure sectors—encompassing coal, iron ore, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity—account for more than 40 per cent of the Index of Industrial Production (IIP). Due to this significant weight, experts indicate that overall factory output growth for July may moderate accordingly. The complete industrial growth data for the month is scheduled to be announced on August 28.

An official statement revealed mixed performances across the sectors in July. Iron ore, cement, electricity, coal, steel, and refinery products recorded growth rates of 29.5 per cent, 13.1 per cent, 9 per cent, 7.6 per cent, 2.9 per cent, and 2.7 per cent, respectively. Conversely, natural gas, crude oil, and fertilizers experienced negative growth during the month. Notably, iron ore, electricity, and cement have acted as the primary drivers of overall ICI growth over recent months.

The cumulative growth rate of the ICI for the April-July period stood at 4.3 per cent, marking an improvement compared to the 1.5 per cent recorded in the same period of the previous year.

Aditi Nayar, Chief Economist at ICRA, noted that iron ore output growth moderated sharply to 29.5 per cent in July from 44.5 per cent in June due to an unfavourable base, exerting a downward pressure of 95 basis points on the core output print relative to the previous month. Furthermore, electricity generation and steel output witnessed slower growth in July compared to June, while fertilizer and crude oil saw steeper contractions. Fertilizer output has now contracted for five consecutive months, impacted by the ongoing conflict in West Asia.

On the other hand, refinery products expanded for the first time in four months, registering a muted growth rate of 2.7 per cent. Coal output touched an 11-month high of 7.6 per cent, and cement output expanded at a 7-month high of 13.1 per cent. Analysts suggest that construction activity remained healthy, with cement output supported by inventory replenishment following an extended construction period in June, which was affected by a sizeable monsoon deficit.

Reflecting on these trends, Nayar stated that IIP growth is expected to moderate to 6-6.5 per cent in July, down from 7.3 per cent in June.

"The moderation in core sector output growth highlights the cyclical nature of heavy industries and infrastructure. Since core sectors hold a significant weight in the Index of Industrial Production, a slowdown here directly signals a cooling in broader factory output for the month. For businesses and industrial startups operating within the manufacturing and supply chain ecosystems, keeping a close watch on these macroeconomic indicators is vital for managing inventory, production planning, and capital deployment effectively." — Dr. Shishir Gupta, Founder & CEO, StartupLanes