Eight core sectors of the economy posted a 2.8 per cent year-on-year growth in May, the slowest pace since 2.9 per cent in January, due to a decline in output of refinery and steel products.
These eight sectors — comprising almost 38 per cent of the weight of items included in the Index of Industrial Production (IIP) — had recorded an 8.5 per cent growth in April, which was the highest since 8.54 per cent in November 2014.
The low growth in May was on account of a contraction in output of crude oil (- 3.3 per cent versus 0.8 per cent growth in May 2015) and natural gas (- 6.9 per cent, versus - 3 per cent in May 2015) in addition to a very marginal expansion registered by refinery products (1.2 per cent versus 7.8 per cent in May 2015). Besides, the growth in electricity generation with a weight of 10.3 per cent in the IIP — the maximum weight among the eight core sectors — slowed down to 4.6 per cent as against 6 per cent in May 2015. The growth in coal output at 5.5 per cent in May was slower than 7.6 per cent in May 2015, and so was the performance of cement (2.4 per cent as against 2.7 per cent in May 2015). Fertiliser was the lone sector to post double digit growth at 14.8 per cent (versus 1.3 per cent in May 2015), while steel sector production grew by 3.2 per cent (as against 2 per cent in May 2015).
Bidisha Ganguly, Chief Economist, Confederation of Indian Industry (CII), said: “Given that core sector comprises mostly commodity related sectors which are not doing that well, acceleration in growth is unlikely to be sustained. As regards the (Indian) economy, acceleration in growth will come only from the consumption side, while in the core sector, ups and down will be seen in the near term.”
The core sector output had gone to the negative growth territory in November 2015 when it shrank by (-) 1.3 per cent. When core sector recorded an 8.5 per cent growth in April, the highest since 8.54 per cent in November 2014, experts had pointed out that it was becoming difficult to expect a one-to-one correspondence between core sector growth and overall IIP growth. The IIP for April shrank (-) 0.8% — the first IIP contraction in three months.
Cumulative growthThe cumulative growth of the core sector during April to May in FY’17 was 5.5 per cent as against 2.1 per cent during the same period in the previous fiscal.
