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Demonetization effect: Core sector growth falls to 4.9% in Nov from 6.6% in Oct 2016

The growth performance of core sectors namely–coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity–fell from 6.6% in October to 4.9% in November 2016 owing to the demonetization move.

This however comes across as a healthy performance when compared to the 0.6% growth rate in the same period last year. PTI reported that coal, steel and electricity helped the core industries achieve higher growth against last year’s low numbers.

The core sectors, which contribute 38% to the total industrial production, expanded 4.9% in April-November 2016 compared to 2.5% growth in the same period last financial year, according to data released by the commerce and industry ministry on Monday. Coal, steel, electricity production jumped 6.4%, 5.6% and 10.2%, respectively.

Refinery and cement output growth stood at 2% and 0.5%, respectively, in November 2016, against 1.7% and (-)1.7% in the month last year. However, crude oil and natural gas production contracted by 5.4% and 1.7%, respectively.

Real Estate, which is infamous for hoarding black money, has been one of the most impacted sector post Prime Minister Narendra Modi’s unprecedented note ban announcement on November 8. Aditi Nayar, Senior Economist at ICRA told Money Control that the whole year GDP forecast for the infrastructure sector before the announcement was set at 7.7% and has now been reduced to 6.8%.

However, electricity generation grew at 10.2% year-on-year in November, faster than a 2.8% rise in the previous month.