Core sector growth slows to 0.2% in June; will RBI cut rates in August?

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July 31, 2019 6:07 PM

With the core sector growth falling in June, the Reserve Bank of India (RBI) may cut rates in the upcoming bi-monthly monetary policy, analysts said.

setback for economy Eight core sectors growth slows down in juneThe growth in eight core industries fell to 0.2 per cent largely on account of shrinkage in the oil-related sectors and cement production, the government data released on Wednesday said.

With the core sector growth falling in the monht of June, the Reserve Bank of India (RBI) may cut rates in the upcoming bi-monthly monetary policy, the analysts said. The growth in eight core industries fell to 0.2 per cent largely on account of shrinkage in the oil-related sectors and cement production, the government data released on Wednesday said. In June 2018, the eight core industries namely coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity expanded by 7.8 per cent.  In the April-June quarter, the eight sectors grew by 3.5 per cent as against 5.5 per cent in the corresponding period of the last year.

Since the improvement in the industrial outlook remains limited, the possibility of the repo rate cut in August 2019 policy review gets strengthened,” Aditi Nayar, Principal Economist, ICRA said.  The muted performance of cement and steel sectors in June 2019 maybe due to slowdown in government spending before budget, she added. “The marginal core sector growth, combined with the contraction in both auto production and non-oil merchandise exports, suggests that IIP growth would be muted at around 1% in June 2019,” she also said.

Also read: Fiscal deficit crosses 61% of budgeted target in first quarter of FY 2019-20; key things to know

The crude oil output narrowed down to 6.8 per cent while the refinery segment fell by 9.3 per cent. The cement output declined by 1.5 pe cent. Fertiliser production was also in the negative zone. Steel and electricity production, however, increased by 6.9 per cent and 7.3 per cent, respectively, during the month under review.

Meanwhile, the government’s fiscal deficit touched Rs 4.32 lakh crore for the June quarter, which is 61.4 per cent of the budget estimate for 2019-20 fiscal.

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