Central Idea

India’s eight core sectors experienced a significant slowdown, growing by 7.8% in November, down from 12% in October.

About Core Industries in India

The main or key industries constitute the core sectors of an economy.
In India, eight sectors are considered the core sectors.
These sectors are in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

The monthly Index of Eight Core Industries (ICI) is a production volume index.
ICI measures the collective and individual performance of production in selected eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity.
Before the 2004-05 series six core industries namely Coal, Cement, Finished Steel, Electricity, Crude petroleum and Refinery products constituted the index basket.
Two more industries i.e. Fertilizer and Natural Gas were added to the index basket in the 2004-05 series. The ICI series with base 2011-12 will continue to have eight core industries.

The components covered in these eight industries for compilation of the index are as follows:

Coal – Coal Production excluding Coking coal.
Crude Oil – Total Crude Oil Production.
Natural Gas – Total Natural Gas Production.
Refinery Products – Total Refinery Production (in terms of Crude Throughput).
Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).
Steel – Production of Alloy and Non-Alloy Steel only.
Cement – Production of Large Plants and Mini Plants.
Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.

Decline in ICI: The ICI witnessed a 3.34% drop from October, marking its lowest since March 2023.
Sector-Specific Trends: Notably, only refinery products and coal showed month-on-month growth, with significant year-on-year increases.
Steel Production: Growth in steel production hit a 13-month low at 9.1%.
Crude Oil and Fertilizer: Crude oil saw a contraction, while fertilizer production growth decelerated.
Natural Gas and Electricity: Both natural gas output and electricity generation growth slowed down considerably in November.

Year-on-Year Comparison: The core sectors had a 5.7% growth in November 2022.
Influence of Base Effects: Last year’s high growth in certain sectors like cement significantly influenced this year’s comparative figures.

Bank of Baroda’s Perspective: The slowdown in fertilizer growth aligns with the end of the rabi sowing season, as per the bank’s chief economist.
IIP Forecast: The core sectors are expected to contribute to an IIP growth of 7%-8%.
Economists’ View: Experts predict a continued slowdown in core sector growth due to strong base effects from the previous fiscal year.

India Ratings and Research Predictions: A slowdown in core sector growth is anticipated in the coming months, influenced by the strong base effect.
Broader Economic Impact: This slowdown is indicative of larger economic challenges, potentially affecting future policy and market expectations.

Economic Resilience Test: The trends in India’s core sectors underscore the challenges in sustaining growth amid diverse economic conditions.
Need for Strategic Economic Planning: Addressing these slowdowns will require astute economic planning and possibly new strategies to boost growth in these key sectors.