Because the impact of a favourable statistical base will decrease for the balance of FY23, core sector production may show lower YoY growth, although domestic activity may boost sequential growth.

After a terrible showing in October, when annualised growth slowed to a 20-month low of 0.9 percent, India’s core sector production rebounded significantly in November with a year-on-year gain of 5.5 percent.

The gain in the core sector, which includes eight infrastructure sectors: coal, crude oil, refinery products, natural gas, electricity, cement, steel, and fertiliser, was assisted by an increase in five sectors year on year. Cement, coal, power, and steel all had double-digit increase, but fertiliser growth was confined to the mid-single digits.

At the same time, crude oil, natural gas, and refinery product output continue to fall.

“This robust performance is surprising not only because it represents a significant acceleration in growth trajectory, but also because growth is broadly distributed, with 5 out of 8 sectors recording double-digit YoY growth.” Manish Jain, Fund Manager, Ambit Asset Management, Coffee Can PMS.

However, growth in November remained unchanged on a sequential basis.

Growth in the eight-industry core sector production fell to 3.7% in January from 4.1% the previous month, indicating a moderate effect of Omicron-induced region-specific lockdowns.

Even yet, due to the previous year’s favorable base effect, the index of industrial production (IIP) may climb in January, compared to 0.4% growth in December. The core sector accounts for little more than 40% of the IIP. This implies that the industrial sector may have survived the third Covid wave, which was milder than the prior two.

“The industrial sector appears to have escaped relatively unscathed from the third wave, with a muted dip in the y-o-y growth of the core sector as well as the mild sequential decline in the daily average generation of GST e-way bills,” ICRA Chief Economist Aditi Nayar said.

In January, 68.8 million e-way bills were created, compared to 71.6 million the previous month. The core sector expanded by 11.6 percent in the first ten months of the current fiscal year, after contracting by 8.6 percent in the same time the previous year.