Core sector growth fell in July

Growth in output of 8 infrastructure sectors declined to 2.7% against 7.3% in June

Growth in the eight infrastructure sectors fell to 2.7 per cent in July from 7.3 per cent in June, owing to contraction in five of these sectors — crude oil, natural gas, refinery products, fertilisers, and steel — official data showed on Monday.

The eight sectors had recorded 5.3 per cent growth in the corresponding month last year.

Monday’s data might take a toll on industrial expansion data for July, as core sector industries account for about 38 per cent of the Index of Industrial Production.

For two of the sectors, coal and electricity generation, the growth in July was less than in June. Only in the cement sector was the growth higher (16.5 per cent, against 13.6 per cent in June).

Aditi Nayar, senior economist, Icra, said the contraction in five of the eight core sectors showed the rise in economic growth in the June quarter didn’t signify the beginning of a broad-based revival in growth.

For the quarter ended June this year, growth in gross domestic product stood at 5.7 per cent, against 4.6 per cent in the previous quarter and 4.7 per cent in the year-ago period.

Compared to FY14, the demand outlook the cement sector in FY15 was favourable, given the government’s focus on revival in infrastructure and investment growth, she said.

“However, double-digit cement growth in July appears unsustainable, as it is likely the continued dry spell in large parts of the country till the middle of the month extended the window for construction activities and temporarily boosted cement demand,” she added.

Steel, another input for construction, declined 3.4 per cent.

The asymmetry between the cement and steel sectors could be because of different base effects — while the cement sector grew only 0.2 per cent in July last year, growth in the steel segment stood at 18.1 per cent.

In July, growth in electricity generation was 11.2 per cent, against 15.7 per cent in June. Persistent high electricity generation might give a boost to other industrial sectors, as power cuts are one of the main hurdles to high industrial growth.

Growth in the coal sector stood at 6.2 per cent, against 8.1 per cent in June.