India’s Core Sector Growth Slows to 9-Month Low at 0.7% in May

It was first reported by the Commerce Ministry on Tuesday; that India’s eight core infrastructure sectors grew only by 0.7% in May, which is the lowest growth for the last nine months.

The eight core industries, which will contribute around 40% to the industrial output of the country, include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity.
All the sectors, except refinery products, steel, and cement, for which positive growth occurred over this particular month.

• While the refiners registered a rise of 1.1% effectively reversing a contraction of 4.5% in April.
• The steel production increased by 6.7% from the previous month’s growth of 4.4%.
• Cement production improved significantly by 9.2% from 6.3% in April.
• Steel production grew by 6.7% following the growth of the previous month at 4.4%.
• While cement production again showed remarkable percentage increases of 9.2 from 6.3 in April. Steel production went up by 6.7%, following the growth of the previous month at 4.4%.
• While cement production increased significantly: 9.2% from 6.3% in April.
  The other four sectors recorded negatives:
• Crude oil showing a decline of 1.8%,
• Natural Gas declined 3.6%,
• Fertilizers dropped by 5.9%, and
• Electricity fell by 5.8%.

These poor performances in those four sectors had dragged down the overall index, hinting at a sustained slowdown in the industrial momentum of the economy. The figure for May is significantly lower compared to the April revised figure of growth and may weigh down the Index of Industrial Production (IIP) data, which will come up shortly.

The performance of core sectors is a major economic indicator, presumed to lead overall industrial and GDP movement. The slowdown comes at a time when the pressures are high due to global commodity price rise and weak demand from major sectors.

With infrastructure and industrial production forming the backbone of India’s growth ambitions, trends in these two parameters will be keenly scrutinized by policymakers as they consider options for jump-starting the economy in the coming quarters.