Cloud over growth gets darker but hopes glimmer

Core sector growth slows to 3.1% in July

After three months of low growth, the eight core industries grew 3.1 per cent in July this year, against 4.5 per cent in the corresponding month last year, official data showed on Monday.

In July, the core sector, which has 38 per cent weight in the Index of Industrial Production (IIP), grew at a sluggish 0.1 per cent, taking overall growth in the core sector in the April-July period to 1.7 per cent, against 6.3 per cent in the year-ago period.

The revival in core sector growth was due to strong expansion in the steel, petroleum refinery products and electricity sectors. Experts said this could lead to positive growth in industrial production, after two consecutive months of contraction. “This is a slight improvement, but one has to see if this can be sustained. Also, we should get a positive growth rate in industries this month,” said Madan Sabnavis, chief economist, CARE Ratings.

Growth of 3.1 per cent in the core sector means a 1.17 per cent rise in the IIP. However, certain segments in the core sector are revised when IIP data are released. Besides, IIP also depends on how the remaining 62 per cent of its segments fare.

Steel saw the steepest rise in output, with production increasing seven per cent, against 1.1 per cent in the corresponding period last year. Electricity generation increased 5.2 per cent, compared with 2.7 per cent in July 2012. In June this year, it had contracted 1.2 per cent. Petroleum refinery products registered 5.1 per cent growth, against 26 per cent in July last year.

Natural gas production, which has been contracting since December 2010, continued to fall in July, too---it plunged 16.1 per cent, against a fall of 13.5 per cent in July 2012. In June, it had fallen 16.7 per cent. Crude oil output continued to slide for the fourth consecutive month, falling 2.3 per cent, against a 0.7 per cent decline in the corresponding period last year.

Coal production rose 1.2 per cent in July, after falling in May and June. The cement and fertilisers segment grew at a sluggish 0.8 per cent and 0.4 per cent in July, against 3.2 per cent and -2.2 per cent in the corresponding month last year, respectively.

In June, when the core sector grew 0.1 per cent, industrial output had declined 2.2 per cent.