Core sector growth remains sluggish at 2.3%

Decline due to 'negative growth' in coal, crude oil, natural gas and fertiliser sectors

The core sector of eight infrastructure industries recorded a growth of 2.3 per cent in May this year against 7.2 per cent in the year-ago period.

The slow growth came on the back of contraction in coal, crude oil, natural gas and fertiliser output, showed the official data released today. "The combined index was 159.2 in May," the commerce and industry ministry said in a statement.

In April, when the core sector grew at the same pace of 2.3 per cent, industrial growth also stood at 2.3 per cent. Experts believe industrial growth for May would remain tardy, too.

"IIP (Index of Industrial Production) growth is usually 1.5 times the core sector growth, but in recent times, the trend has changed and it has remained two-third of the core sector growth. This again suggests the IIP would show a sluggish growth of 1.5 to two per cent for May," said Madan Sabnavis, chief economist, CARE Ratings.

The core sector, which also includes petroleum refinery products, steel, cement and electricity, has a combined weight of 38 per cent in the IIP.

Coal production showed a decline of 3.3 per cent, compared with 9.6 per cent growth in May 2012. Production of crude oil saw a dip of 2.4 per cent, while natural gas contracted significantly by 18.7 per cent. Output of fertilisers also witnessed a decline of two per cent in May. Natural gas production hasn't shown growth since April last year.

Other sectors - petroleum, steel, cement and electricity -witnessed an upside. Electricity, which has the larger weight of 10.3 per cent in the IIP, grew at the sharpest rate among other sectors, registering growth of 6.2 per cent, compared with 5.8 per cent in the corresponding period last year.

Petroleum refinery production expanded five per cent against a high 23.4 per cent in May 2012 and cement rose three per cent against 15.4 per cent, while steel production showed a growth of 4.1 per cent, compared with 3.8 per cent a year ago. Experts believe the coal sector is the major disappointment among all as it would hit electricity generation as well. However, economists also believe cement and steel growth is positive as it shows that there is a slight upside in the areas of infrastructure.