As core sector growth hits 8-month low in April, a cascading impact likely on factory output
Six out of eight sectors falter
Vagaries of the base effect apart, there are real concerns about the weak infrastructure output growth. Of the eight sectors, the performance of six weakened in April compared to March, with refinery products faring the worst after their production was down 4.5 per cent, the poorest showing since November 2022.
The two sectors which saw improved production rates did so only because what came before: natural gas output was up 0.4 per cent after a 12.7 per cent contraction in March, while production of coal rose by 3.5 per cent, up from a 1.6 per cent rise the previous month. Coal output is likely to slow down post June, once the monsoon sets in across parts of the country.
'Economic uncertainty'
The bad start to the new financial year seems to have been partially driven by the 'unprecedented economic uncertainty' caused by the US' 'tariff tantrums', according to Paras Jasrai, economist and associate director, India Ratings and Research. And while the reciprocal tariffs were put on hold on April 9, core sector growth – and industrial growth in general – still faces headwinds.
Next week on May 28, the statistics ministry will release industrial production data for April. After edging up marginally to 3.0 per cent in March, industrial growth may have more than halved last month, going by the performance of the eight core sectors which make up 40 per cent of the Index of Industrial Production. According to Teresa John, deputy head of research and economist at Nirmal Bang Institutional Equities, IIP growth could be as low as 0.1 per cent in April, which would also be an eight-month low.
Other datasets
To be sure, core sector data isn't the only number that is suggestive of weakness in factory output last month. For instance, power generation in April was down 1.8 per cent from a year ago, with lower-than-normal temperatures bringing down daily power generation by 2.5 per cent year-on-year as of May 19, Jasrai of India Ratings and Research pointed out.
On the other hand, the government's capital expenditure should support certain sectors, such as cement. In April, cement production was up 6.7 per cent, as per this week's core sector data.
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