Core Sector Shrinks 1.3%

India's core sector contracted 1.3% in November after expanding for six consecutive months, dragged down by a sharp decline in steel production due to weak demand and imports.
The fall in core sector output may curb industrial growth, which reached a five-year high of 9.8% in October.
The eight infrastructure sectors that make up the core sector index ­ coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity ­ together have a 38% weightage in the Index of Industrial Production (IIP).
The contraction in core sector output is in sharp contrast to the 8.5% growth last November. The Index of Eight Core Industries had increased 3.2% in October.
Steel production declined 8.4% in November, dropping for the fifth consecutive month. Other sectors with lower output were cement (-1.8%), crude oil (-3.3%) and natural gas (-3.9%). The fertilisers sector was the clear outlier with growth of 13.5% last month, while coal out put rose 3.5%. Electricity generation was the same as last year.
The core sector's cumulative growth during April to November period was 2%.
Part of the contraction in core sector output can be attributed to the fewer number of working days as compared with November 2014 and the shift in the festive calendar. The peak Diwali festival was in October last year. The last time core sector growth fell was in April, when it shrank by 0.4%.
Joshi said that while bottlenecks in coal production have been removed, excess capacity in cement and steel, along with imports in the latter, had made them uncompetitive.

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