8 key core sectors clock 50-month low growth

For an economy that is already losing steam, there is more bad news — a 50-month low growth in key infrastructure sectors including electricity, natural gas and petroleum refinery products.

This may exert further pressure on the Reserve Bank of India to cut interest rates next week to give support to the economy which is bereft of any fiscal stimulus in the Union Budget.

Official data released on Wednesday showed India’s core sector, which consists of eight infrastructure segments, grew merely 0.2% in June compared to 7.8% in the same month last year. Four out of eight sectors, including cement, petroleum refinery and natural gas contracted.

A slowdown in the core sector growth indicates a slump in industrial output. It also indicates limited activity in the infrastructure space that is spearheaded by the government. Core sector accounts for 41% of total industrial output, the data for which will be released in mid-August.

For example, cement, the production of which should have registered a growth on the back of the government’s flagship affordable housing programme and a big push to building of roads, has declined 1.5%, the latest data showed.

Similarly, a 9.3% decline in petroleum refinery production in India would mean more imports of petroleum products like diesel and petrol to meet domestic demand. This could jack up prices. India imports crude oil but not petrol and diesel. It refines imported crude.

The reason for such a sharp slowdown in refinery production was not stated but experts said that in order to become BS-VI compliant by April 2020, most of the state-owned refineries must have to shut down operations temporarily.

Eight core industries are — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity.

Steel and electricity continued to grow at a robust rate preventing the decline in the overall core sector output in June. Both the sectors grew in the range of 7% and above.

Most of the macro-economic numbers this month suggested that recovery in the Indian economy is nowhere on the horizon.