Core sector growth slows to 2.5% in March

Growth in output of the eight core sectors fell to 2.5 per cent in March from 4.5 per cent in the previous month. For 2013-14, production in these sectors rose 2.6 per cent, the lowest in at least nine years, official data showed on Wednesday.

Core sector growth for 2012-13 stood at 6.5 per cent.

The growth in March was pulled down by the fertiliser, natural gas and crude oil segments. While cement production remained flat, growth in electricity generation nearly halved in March, compared to February.

The core sector data for March could take a toll on industrial production data for the month, as these infrastructure sectors account for 38 per cent of the Index of Industrial Production. “The slack core sector print, in conjunction with the decline in merchandise exports in year-on-year terms, points towards a likely industrial contraction in March,” said Aditi Nayar, senior economist, Icra Ltd. In March, merchandise exports had declined 3.15 per cent year-on-year to $29.57 billion.

Industrial production for February had declined 1.9 per cent, despite the core sector growing at a five-month high of 4.5 per cent during the month. If industrial production contracts in March, too, it will be the seventh month of IIP contraction in FY14.

The IIP could be affected by the fact that its largest core sector contributor, the electricity segment, grew only 5.4 per cent in March, against 10.4 per cent in February.

Nayar said the current healthy reservoir levels notwithstanding, the possibility of a sub-normal monsoon would hit hydroelectricity generation and core sector growth in 2014-15. Electricity accounts for 10.36 per cent of the IIP.

The natural gas sector’s output continued to contract during 2013-14. Production fell 9.3 per cent in March, compared with a 4.4 per cent decline in February. The sector is facing a slew of problems, including the issue of gas pricing and geological woes.

Output of the fertiliser sector contracted 6.1 per cent in March, a consecutive month of contraction. This segment has been hit by the issues of gas pricing and subsidies.

In March, crude oil production fell 1.6 per cent, against 1.9 per cent growth in February. Cement output remained flat, compared to 2.3 per cent growth in February. Refinery products saw 2.8 per cent growth, against 3.2 per cent in February. Coal output rose 0.7 per cent in March, against 0.1 per cent in the previous month.

The steel sector was the only one that grew more in March (5.4 per cent), compared to February (4.8 per cent).