Growth of eight core sectors slows to 0.2% in June

These core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production.

Illustration: Uttam Ghosh/Rediff.com

Growth of eight core industries dropped to 0.2 per cent in June, mainly due to contraction in oil-related sectors as well as cement production, according to official data.

The government on Wednesday also revised downwards the growth rate of these eight sectors for May to 4.3 per cent from the earlier estimate of 5.1 per cent.

The eight core sector industries -- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity -- had expanded by 7.8 per cent in June last year.

These core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

Crude oil output, which has shown negative growth during the past one year, contracted by 6.8 per cent in June, as per the data released by the ministry of commerce and industry.

The output of 'refinery products' too registered de-growth for the second month in a row.

The contraction was 9.3 per cent in June 2019 as against a growth of 12.1 per cent in the year-ago period.

The natural gas segment too posted a de-growth in June.

Cement production, which was showing growth in the previous months, slipped into the negative zone.

As per the data, the segment posted a contraction of 1.5 per cent during the month under review.

However, steel and electricity production showed a growth of 6.9 per cent and 7.3 per cent, respectively.

The fertilisers segment also posted a growth of 1.5 per cent in June, reversing the de-growth registered in the previous two months.

Expansion in coal production (3.2 per cent) too was higher in June over the previous month, but was significantly lower than June 2018 when it stood at 11.5 per cent.

For the April-June period, the eight sectors grew by 3.5 per cent as compared to 5.5 per cent in the same period last year.

Commenting on the data, Aditi Nayar, principal economist with ICRA, said the marginal core sector growth, combined with the contraction in both auto production and non-oil merchandise exports, suggests that IIP growth would be muted at around 1 per cent in June 2019.

The IIP data would be released later this month.

"Overall, there is limited visibility of a broad-based improvement in the Indian industrial outlook," she said.

The core sector data further strengthens the likelihood of a repo rate cut in the August 2019 policy review, Nayar added.

The Reserve Bank is scheduled to release its next bi-monthly monetary policy on August 7.

As per the latest RBI data, credit to industry rose by 6.4 per cent in June 2019 as compared to an increase of 0.9 per cent in the year-ago month.

Within industry, credit growth to infrastructure; chemical and chemical products; vehicles, vehicle parts and transport equipment; cement and cement products; and engineering sectors accelerated.

However, credit growth to basic metal and metal products; textiles; food processing; and construction decelerated/contracted.