Amidst the bustling economic activity, recent data from India’s core industries and manufacturing sector signal a concerning deceleration in economic momentum. The government’s provisional figures for September reveal a marked slowdown in the production growth of key infrastructure industries, including cement, coal, steel, and electricity, to a four-month low of 8.1% year-on-year growth, down from 12.5% in August. This deceleration was evident across all but the fertilizer sector, which saw an uptick as farmers prepared for the rabi cropping season. The heavy monsoon rains in September, which exceeded expectations by 13%, likely played a role in dampening demand and production, particularly affecting cement, electricity, and steel industries. A sequential analysis shows a contraction across all eight core sectors, with a notable 4.8% decline from August. Coal production, however, remained a bright spot, with a slight dip in growth but maintaining a robust 16.1% year-on-year pace. The weakening demand, especially for consumer goods, has led to the slowest rise in new orders in a year, with international sales also losing momentum. Alarmingly, less than 4% of the surveyed companies reported workforce expansions, indicating a significant slowdown in job creation within the manufacturing sector since April. Manufacturers are also grappling with accelerated input cost inflation, yet factory gate inflation has slowed, suggesting producers are hesitant to pass on the higher costs amid uncertain demand. Business confidence is waning, with inflation expectations identified as a primary concern that could further dampen demand and production in the coming year. Additionally, the anticipated lower kharif crop output could signal limited support from the agricultural sector, potentially impacting rural incomes. Policymakers are now faced with the daunting task of addressing the dual challenges of slowing growth and persistent inflation, a balancing act that requires strategic foresight and decisive action to sustain economic stability and progress.
