In what could further raise the clamour from the industry and the government for an interest rate cut by the RBI to revive the slowing economy, core sector output data released on Monday showed that year-on-year growth of the eight industries that constitute the sector fell to a three-month low of 1.1% in July, owing mainly to a contraction in growth of crude oil, natural gas and steel.
The growth of these industries’ output — that have a combined weight of 38% in the index of industrial production – in July was slower than 4.1% in July last year, 3% this June and a six-month high of 4.4% in May.
Growth was as high as 8.7% in June 2014 and had hit an 18-month trough of -0.4% in April. Core sector output during April-July of FY16 expanded at a slower pace of 2.1% as against 5.5% in the first four months of FY15.
The RBI cut the key lending rate thrice this year, but experts feel there is room for a 25 basis point cut thanks to lower inflation. The next monetary policy review is slated for September 29. In July, wholesale inflation was -4.05%, in the negative zone for the ninth consecutive month, while retail inflation was 3.78%, lower than the RBI’s target of 6% by January 2016, thanks to lower global crude oil and commodity prices. In July, output of crude oil shrunk by 0.4%, while that of natural gas and steel contracted by (-) 4.4% and (-) 2.6% respectively.
Barring fertilisers, which at 8.6% growth in July performed better than 5.8% in June, and electricity (3.5% in July as against 0.2% in June) growth of the other six sectors (coal, crude, natural gas, refinery products, steel and cement) was lower in July than that in June.
Seen on y-o-y basis, only refinery products (2.9% in July versus -5.2% in July 2014), fertilisers (8.6% versus -4.2% in July 2014) and natural gas (-4.4% versus -8.9% in July 2014) fared better. However, fall in y-o-y growth of electricity (3.5% in July versus 11.8% in July 2014) and cement (1.3% versus 16.5%) was the steepest. The overall growth of eight core industries in FY15 was 3.5% against 4.2% in FY14.