India's Core Sector Growth Slows to 2.3% in February

Key Statistics:

• 2.3%: Core sector growth in February, down from 4.7% in January
• 0.5%: Electricity output growth in February, down from 5.2% in January
• 20%: Weight of electricity in the Index of Industrial Production (IIP)
• 7.2%: Steel output growth in February, down from 11.5% in January
• 9.3%: Cement output growth in February, down from 11.3% in January

Overview

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India's core sector growth slowed sharply to 2.3% in February, a three-month low, driven by weaker electricity generation and continued contraction in oil and gas output. The eight infrastructure sectors, which make up two-fifths of the Index of Industrial Production (IIP), are a key indicator of broader industrial activity.

Sectoral Performance

• Electricity: Output growth slowed to 0.5% in February, down from 5.2% in January, due to its high weight of 20% in the IIP.
• Steel: Output grew 7.2% in February, down from 11.5% in January.
• Cement: Output expanded 9.3% in February, down from 11.3% in January.
• Energy: Crude oil production contracted 5.2%, while natural gas output fell 5%. Refinery products also slipped into contraction, falling 1% in February.

Outlook

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The data suggests that while construction-linked sectors such as steel and cement continue to support industrial activity, weakness in energy production and softer electricity growth are weighing on the headline print. The weakness is expected to continue from the coming months, with a war in West Asia weighing on output.