1. Core sector growth slows to 1.8% in Jan; raises rate cut hopes by RBI

Core sector growth slows to 1.8% in Jan; raises rate cut hopes by RBI

Growth in eight core industries slowed in 1.8 per cent in January, the lowest in 13 months, which along with a slowdown in the manufacturing...

By: | New Delhi | Updated: March 2, 2015 9:22 PM
rbi, rbi rate cut, raghuram rajan , raghuram rajan rbi, core sectors

The core sector contributes 38 per cent to the overall industrial production, a parameter that RBI takes into account while framing its monetary policy. PTI

Growth in eight core industries slowed in 1.8 per cent in January, the lowest in 13 months, which along with a slowdown in the manufacturing sector has raised hopes of a rate cut by Reserve Bank of India (RBI).

Negative growth in crude oil and natural gas and low growth in steel, cement and electricity have led to the dip in the overall growth rate of core industries.

The eight core sector industries — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — had expanded by 3.7 per cent in January, 2014.

The growth was 2.4 per cent in December 2014.

The data set was revised in January 2014 when the growth rate was 3.7 per cent and the figures before that period are not comparable. The 1.8 per cent growth in January 2015 is the slowest in the 13 months of the revised data.

core industries, core industries performance

Performance of 8 core industries (Graphs: PTI)

The core sector contributes 38 per cent to the overall industrial production, a parameter that RBI takes into account while framing its monetary policy.

Production of crude oil and natural gas contracted by 2.3 per cent and 6.6 per cent respectively, according to the data released by the Commerce and Industry Ministry.

Output in steel, cement and electricity registered growth during the month under review, but the expansion is lower as compared to that in January 2014.

However, coal and refinery products output grew by 1.7 per cent and 4.7 per cent respectively against 1.2 per cent and contraction of 4.2 per cent in the year ago period.

During April-January period, the eight sectors grew by 4.1 per cent as against 4 per cent in the same period of the previous fiscal.

“The sluggish performance of available lead indicators, such as the low growth of core industries and automobile production as well as the contraction in merchandise exports, foretell a muted outlook for IIP growth for January 2015,” rating agency ICRA said.

As per HSBC India Purchasing Managers’ Index (PMI) — a composite gauge designed to give a single-figure snapshot of manufacturing business conditions – manufacturing growth slipped to a three-month low in January on slower pace of order flows from domestic and global markets, raising hopes of a rate cut by the RBI in its policy review.

Meanwhile, analysts said the Reserve Bank of India (RBI) may cut key interest rates as early as this week, as the fiscal measures announced in the Union Budget are unlikely to disturb the “disinflation” trend, say analysts.

“We maintain our view that RBI will cut policy rates by 125 bps by the end of 2015 with the next move coming as early as this week,” Morgan Stanley’s Asia economist Chetan Ahya said in a research note.

  1. No Comments.

Go to Top