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With fall in output of crude oil, natural gas and electricity, the growth of eight key infrastructure sectors slowed down to 4.3 per cent in May. It was same in April but 19.3 per cent in May last year.
During April-May this fiscal, the output growth of these eight sectors slowed down to 4.3 per cent as against 14.3 per cent in the year-ago period. Coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity count among the core sectors, comprising 40 per cent of the Index of Industrial Production. Hence, performance of core sector also impacts overall industrial growth, date for which will be out on July 12. However, experts are not overly worried.
Said Madan Sabnavis, chief economist at Bank of Baroda: “Core sector growth for May came in at 4.3 per cent which is quite impressive considering that last year growth was 19.3 per cent. We may expect IIP growth to be in the region of 3-3.5 per cent for May.”
Crude oil down
During the period under review, crude oil production declined by 1.9 per cent, while natural gas fell by 0.3 per cent. However, petroleum refinery production increased by 2.8 per cent.
Coal growth was 7.2 per cent which can be related to higher steel production. Electricity production declined marginally by 0.3 per cent mainly due to high base effect of 23.5 per cent growth last year. It was otherwise a very hot month where demand had gone up as demand for cooling increased. Fertilizers production was up by 9.7 per cent and expected to continue to remain robust for the next two months to keep pace with the kharif sowing requirements.
According to Sabnavis, there was continued traction in cement and steel that can be attributed to government spending. In June, the Centre had given an additional instalment to States as part of State transfers to enable higher capex. Further, a loan was also extended to expedite the same.
The oil basket, however, continued to disappoint with negative growth for crude and natural gas. Lower global crude prices normally are associated with lower domestic production. Refinery products did relatively better with 2.8 per cent growth with exports also contributing to the same, added Sabnavis.
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