Core sector growth slows to 2.1% in Aug

Written by fe Bureau | New Delhi | Updated: Sep 29 2012, 09:53am hrs
Fall in the output of crude oil, fertilisers, cement and natural gas pulled down the growth rate of eight core sectors of the industry to 2.1% in August from 3.8% a year ago.

The eight core industries of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity have a combined weight of 37.9% in the Index of Industrial Production (IIP). The combined index was 143.1 in August 2012. These numbers would impact the industrial production data for August which are set to be released next month.

The cumulative expansion of these industries in April-August 2012 slowed to 2.8 % from 5.5 % in the same period last year, according to official data released on Friday.

The moderation in growth was on account of the negative growths in the production of natural gas, cement, fertilisers and crude oil, besides a decline in the growth rates of steel and electricity production, said a commerce ministry statement.

Experts attribute the fall in growth to base effect and the revision in last months growth numbers.

This reflects a continued slowdown in industrial activity and the demand conditions are adding to this worry. While coal has improved, the actual production is down. The real worry is the drop in cement. The overall implication is not good for industrial activity. This might reflect in a downslide in the IIP growth next month, said Saugata Bhattacharya, chief economist, Axis Bank.

While natural gas and crude oil production contracted by 13.5% and 0.6 %, respectively in August, fertiliser and cement output shrunk by 2.1% and 2.4% in the month.

Steel and electricity production slowed to 1.8% and 1.7%, respectively, compared with 7.9% and 9.4% in the corresponding period last year.

However coal and petroleum refinery output grew by 11% and 8.4% in August, against a growth rate of 15.2% and 3.8% respectively in August 2011.