Core sector growth slows to 2.1% in August

In a further confirmation of the continued sluggishness in the economy, the growth rate of the eight core sector industries decelerated to 2.1 per cent in August from 3.8 per cent in the same month a year ago, mainly owing to contraction in output of crude oil, natural gas, fertilizers and cement.

Consequent to the dismal performance during the month, the official data on the key infrastructure industries, released here on Friday, revealed that the cumulative growth rate of the core sector during the April-August period this fiscal also declined to 2.8 per cent from a comparatively healthier 5.5 per cent expansion achieved in the like five months of 2011-12.

“The moderation in growth was on account of the negative growth in production of natural gas, cement, fertilizers and crude oil, besides a decline in the growth rates of steel and electricity production,” the official statement said.

With the eight infrastructure industries — coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity — having a weight of 37.9 per cent in the Index of Industrial Production (IIP), it is no surprise that economic analysts anticipate the poor show by the core sector to negative impact of overall industrial growth during the month. The IIP data for August is due for release next month. “The core sector numbers are bad. It will have its effect on IIP as well,” Crisil’s chief economist D. K. Joshi said.

As per the core sector data for August, the production growth rate of natural gas and crude oil production contracted by 13.5 per cent and 0.6 per cent, respectively. Likewise, fertilizer and cement also moved into negative territory with output growth rates of minus 2.1 per cent and minus 2.4 per cent, respectively, during the month.

Although steel and electricity generation maintained a positive trend, their output growth rates declined to 1.8 per cent and 1.7 per cent, respectively, as compared to the robust expansions of 7.9 per cent and 9.4 per cent achieved in the same month a year ago.

The only silver lining during August was the performance of coal and petroleum refinery output, which grew by 11 per cent and 8.4 per cent, respectively, as compared to (-) 15.2 per cent and 3.8 per cent in August last year.