India's core sector growth slips to 8-month low of 4.2% in August

8 segments cumulatively grew 5.5% in first five months

The eight core sectors of the economy saw growth slide to an eight-month low of 4.2 per cent in August, down from a revised 7.3 per cent in July. 

A sustained slowdown in the energy segment along with lower growth in most sectors other than cement production led to a sluggish rise in growth.

Contributing 40 per cent to the total industrial production, output of the core sectors saw lower growth across a majority of sectors (five). A similar trend was also seen in July.

Data released by the commerce and industry ministry on Monday showed that eight segments — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — cumulatively grew 5.5 per cent in the first five months (April-August) of the current financial year, remaining higher than the 3 per cent growth in the corresponding period of FY18.

“The sharp slide in growth of refinery production, that has the biggest weight in the core sector, was the chief driver of the decline in core sector expansion in August 2018,” said Aditi Nayar, principal economist at rating agency Icra. Refinery products had remained the biggest growth puller since June, when India managed to capitalise on the higher crude prices globally. However, in August, it rose by only 5.1 per cent, down from the more than double (12.3 per cent) in the previous month.

Elsewhere, led by an unfavourable base effect, coal output growth slipped to a modest 2.4 per cent, its lowest level in six months from 9.8 per cent in July, as a record monsoon hampered production across the country. As a result, electricity generation also took a hit at 5.4 per cent in August, down from the 6.7 per cent rise in July.

Other broad fuel components continued to do badly. Crude oil output contracted for the ninth straight month, going down 3.7 per cent, compared to 5.4 per cent in July. On the other hand, natural gas production made a comeback in the growth charts with a 1.1 per cent growth after three straight months of decline.

Cement production pulled the highest growth in August, rising to a four-month high of 14.3 per cent, up from 11.1 per cent in July. The Centre’s focus on infrastructure building has led to cement production maintaining double-digit growth for the past 10 months, despite wild swings.

“Lower performance of fertilisers may be attributed to higher imports as well as lower consumption demand. The slowdown in steel production from 6.9 per cent to 3.9 per cent is indicative of the volatility witnessed in this sector’s growth this year,” said Madan Sabnavis, chief economist at CARE Ratings.