Core sector growth slows in June, to weigh on IIP

As the base normalises, growth in the core infrastructure sector will likely remain under pressure in July and August, some analysts said.

Core sector growth slows in June, to weigh on IIP
The data showed a mixed trend — while coal recorded a 31.1% jump from a year before in June, crude oil output fell 1.7%.

Growth in the output of eight core infrastructure sectors slowed to 12.7% in June from a 13-month peak of 19.3% in the previous month, as the favourable base effect started to wane.

According to the data released by the industry ministry on Friday, barring cement and fertiliser, six out of eight sectors witnessed a sequential slowdown in growth, while only fertiliser and cement saw an uptick. Sequentially, the output of the eight infrastructure sectors witnessed a 4.1% drop in June.

It will potentially drag down the growth of the index of industrial production (IIP) in June from a 12-month high of 19.6% in May; still, the IIP may record a double-digit expansion in June, analysts said. The core industries make up for 40.3% of the IIP.

As the base normalises, growth in the core infrastructure sector will likely remain under pressure in July and August, some analysts said.

Nevertheless, the core index still grew at a decent pace of 8% in June from the pre-pandemic level (same month of 2019).

The data showed a mixed trend — while coal recorded a 31.1% jump from a year before in June, crude oil output fell 1.7%. The growth in the output of natural gas, steel, cement and electricity stood at 1.2%, 3.3%, 19.4% and 15.5% in June, against 7%, 14.6%, 26.2% and 23.5%, respectively, in the previous month, the data showed.

The growth in refinery products and fertilisers was to the tune of 15.1% and 8.2% in June, compared with 16.7% and 22.8%, respectively, in May.

Icra chief economist Aditi Nayar said, “In line with the moderation in the YoY performance recorded by most high frequency indicators as well as the core sector in June 2022, we expect the IIP growth to ease to ~11-13% in that month.”

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