India’s core sector growth slowed to approximately 2.3% in May 2014, declining from 4.2% in April. Cumulative growth of the eight core industries (coal, crude oil, fertiliser, natural gas, refinery products, steel, cement and electricity) during April – May 2014 increased by around 3.3%.
The slowdown in core sector growth was attributed to a poor performance by the steel and powers sectors. Data released by the Commerce Ministry revealed that steel production decreased by 2%, against a growth of 3.1% recorded in April 2014 and electricity generation grew by 6.3%, compared to 11.2% in April. However, according to the figures, the coal, fertiliser, cement and natural gas industries performed well in May. Fertiliser production grew 17.6% during the month, compared to 11.1% in April, while coal production increased by 5.5%, compared to 3.3% in the previous month. Cement production also saw an improvement in May, recording a growth of 8.7%, against 6.7% in April.
The core sectors have a combined weight of over 38% of the index of industrial production (IIP). Aditi Nayar, Senior Economist at ICRA, noted that the deterioration in the performance of the steel and electricity sectors relative to the previous month was largely responsible for core sector growth slowing, despite improved growth in the coal, fertilisers and cement industries. According to Nayar, a favourable base effect and the y/y double-digit rise in merchandise exports in May would have boosted IIP activity during the month.
Adapted from press release by Rosalie Starling
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