June core sector recovers, up 5.2%

Growth in the eight core sectors rose 5.2 per cent in June, on the back of robust coal and cement production. The index recovered from a five-month low in May, when it had grown 2.8 per cent. SUBHAYAN CHAKRABORTY reports Factory growth at 4-month high of 51.8 in July: PMI

Growth in the eight core sectors rose 5.2 per cent in June, on the back of robust growth in coal and cement production. The index recovered from a five-month low in May, when it had grown 2.8 per cent.

Data released by the commerce ministry on Monday showed eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — had a cumulative growth of 5.4 per cent for the months leading up to June. The core sectors, which constitute 38 per cent of India’s total industrial production, had a lower growth of 2.5 per cent in the same period the previous year.

The June core sector numbers represent the last crucial macroeconomic data before the Reserve Bank of India (RBI) announces the monetary policy review next week. Rising industrial growth and high food inflation might convince RBI to retain the current policy rate of 6.5 per cent. Madan Sabnavis, chief economist, CARE Ratings, said the RBI will also take notice of the growing debate over index of industrial production numbers, not accurately portraying the state of the economy.

While only fertiliser output had registered double-digit growth in May, coal and cement production rose 12 per cent and 10.3 per cent, respectively, in June. Rising by 5.5 per cent in May, coal production grew at the fastest pace in a year. Cement production too jumped after a 2.4 per cent rise in May.

Fertiliser output rose at a slower pace in June, at 9.8 per cent. It had been the fastest growing sector in May, rising 14.8 per cent. It is also the highest growing sector in FY17, rising by a cumulative 11 per cent. Growth in refinery products had consistently risen since December 2015, before dropping to a marginal 1.2 per cent rise in May. It rose 3.5 per cent in June.

Electricity generation improved in June, at 8.1 per cent, compared to May when it had risen 4.6 per cent. The rate of growth also fell for steel, whose output rose 2.4 per cent, after a 3.2 per cent growth in the previous month. Both crude oil and natural gas production contracted for the fourth straight month. Crude oil production fell 4.3 per cent in June, compared to a 3.3 per cent fall in May. The rate of fall for natural gas moderated to 4.5 per cent, from 6.9 per cent in May.