Core sector growth slows to 3% in June vs 8.7% last year

Tribune News Service

New Delhi, July 31

Infrastructure output grew at a slower pace of 3% in June as some analysts said it was hobbled by the base effect of last year.

Sectors like coal and steel turned weak while oil and gas production fell. The sharp decline in the pace of growth during June follows a six-month high rate of 4.4% in May this year. The growth rate was much higher a year ago at 8.7% in June 2014.

Devendra Kumar Pant, chief economist, India Ratings, called the numbers encouraging despite weak demand conditions.

He said the June 2015 core sector growth of 3% was affected by strong positive base effect in June 2014 (June 2014 growth was 8.7% highest since October 2013).

“Importantly coal, fertiliser, steel and cement all have grown in June 2015 compared to May 2015. Electricity output growth of 0.2% in June 2015, although on the face of it is disappointing, it is achieved on 15.7% growth in June 2014”, he added.

According to the data released by the Commerce and Industry ministry today, crude oil and natural gas production declined by 0.7% and 5.9% in June this year.

Aditi Nayar, senior economist, ICRA, said the sequential dip in core sector growth in June 2015 is largely driven by an adverse base effect related to electricity generation, and is therefore not a cause for alarm.

However, this base effect is expected to persist for the subsequent two months as well, with electricity generation having expanded by 11-16% in June-August 2015. The pickup in growth of steel production for the third consecutive month in June 2015 is encouraging, she added.