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Core sector growth slows down to 3% in June

03 Aug 2015 Evaluate

Showing signs of inconsistent industrial growth, the Index of Eight Core Industries-coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity, which comprises nearly 38% of the weight of items included in the Index of Industrial Production (IIP), slowed to 3 per cent in June after surging to a six-month high of 4.4 per cent in May. The combined Index of Eight Core Industries stood at 171.2 in June, 2015, three percent higher compared to the index of June, 2014. Its cumulative growth during April to June, 2015-16 was 2.4 per cent.

The decline in the core sector growth for the month of June was mainly on account of contraction in crude oil and natural gas production, while six other sectors reported improvement compared to same period last year. However, month-on-month data showed that barring fertilisers steel and flat production of Cement, all the others grew at a slower pace or showed contraction in June.

Crude Oil production having weight of 5.22% declined by 0.7% in June, 2015 over June, 2014. Its cumulative index during April to June, 2015-16 declined by 0.9% over the corresponding period of previous year. The Natural Gas production having weight of 1.71 % declined by 5.9 % in June, 2015, and its cumulative index during April to June, 2015-16 declined by 4.2 % over the corresponding period of previous year.

On the other hand, Coal production  having weight of 4.38% increased by 6.3% in June, 2015 over June, 2014, while its cumulative index during April to June, 2015-16 increased by 7.3% over corresponding period of previous year. Petroleum Refinery production having weight of  5.94% increased by 7.5% in June, 2015, with its cumulative index during April to June, 2015-16 increasing by 4.2% over the corresponding period of previous year. Fertilizer production having weight of 1.25%, increased by 5.8% in June, 2015, while its cumulative index during April to June, 2015-16 increased by 2.4% over the corresponding period of previous year. Steel production with weight of 6.68%, increased by 4.9% in June, 2015 and its cumulative index during April to June, 2015-16 increased by 2.8% over the corresponding period of previous year. Cement production having weight of 2.41% increased by 2.6% in June, 2015, while its cumulative index during April to June, 2015-16 increased by 0.9 % over the corresponding period of previous year. Electricity generation having weight of 10.32% increased by 0.2% in June, 2015, while it’s cumulative index during April to June, 2015-16 increased by 1.5% over the corresponding period of previous year.

The weak performance of June core sector was also influenced by a positive base effect in June 2014 and may continue for the next two months as well, however it may strengthen the case of another rate cut by the Reserve Bank of India.

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