India’s Core Sector Growth Stumbles Refinery and Fertiliser Slump Highlights Concerns

India’s core sector growth faced a setback in March, as the output of crucial infrastructure segments registered a tepid expansion, primarily attributed to lacklustre performance in refinery products and fertilisers.

The latest data released by the Ministry of Commerce and Industry revealed that the growth of eight core infrastructure industries, constituting a substantial 40% share of India’s industrial output, clocked in at a modest 5.2% for the month, signalling a deceleration from the preceding period.

In February, the nation witnessed a more robust growth trajectory, with the core sectors expanding by 7.1%, marking a three-month high. Notably, this figure was upwardly revised from the initial estimate of 6.7%, indicating a stronger-than-anticipated performance. However, March’s subdued growth underscores the inherent volatility and cyclical nature of India’s core sector industries. The downturn in March was particularly pronounced in the refinery products and fertilisers segments, which witnessed contractions of 0.3% and 1.3%, respectively. Additionally, indicators such as crude oil, natural gas, and steel production also exhibited signs of slowing momentum. Crude oil production, for instance, witnessed a significant month-on-month decline, plummeting from 7.9% to a mere 2%, while natural gas production experienced a notable dip from 11.3% in February to 6.3% in March. Similarly, steel production witnessed a contraction from 9.1% to 5.5% during the period under review.

Conversely, the electricity and cement sectors emerged as outliers, demonstrating resilience amidst the broader slowdown. Both sectors showcased robust growth figures, with the electricity sector posting double-digit expansion and the cement sector registering high single-digit growth, providing a glimmer of optimism amid prevailing challenges. Despite the March setback, the fiscal year 2023-24 witnessed overall production growth across the eight core industries at 7.5%, albeit marking the slowest pace of growth in three years. Nonetheless, this performance outpaced several years under the Modi administration, underscoring the sector’s resilience amidst economic headwinds. Looking ahead, addressing the underlying challenges plaguing key sectors such as refining, and fertilisers will be imperative to sustain the momentum of India’s core sector growth trajectory and bolster the nation’s industrial resilience in the face of evolving macroeconomic dynamics.