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Growth in India’s eight core sectors slipped to a 20-month low of 4% in June from an upgraded 6.4% rise in May, with most sectors barring coal recording a sharp decline in output growth, steel production at a seven-month low, and refinery products slipping into contraction for the first time in five months.
Coal output grew 14.8%, the fastest pace in eight months, with production levels at a three-month high. However, electricity generation slipped to a four-month low of 7.7% in June, with output 3.6% below May’s all-time high levels, amid a heat wave in many parts of the country.
Cement production recovered mildly to rise 1.9% after two months of contraction, while Steel production grew just 2.7%, the slowest in 27 months. The deceleration in these two sectors could be linked to a slowdown in public capital expenditure due to the general elections.
Natural gas production grew 3.3%, the slowest pace in 13 months, while fertilisers output recovered after five months of contractions, to record a 2.4% uptick in June. However, production levels of refinery products dropped 1.5%, while the contraction in crude oil deepened to 2.6% in June from 1.1% in May.
The Index of Core Industries, which constitutes a little over 40% of the Index of Industrial Production (IIP), was 3.2% below May’s level. Industrial output had grown at a seven-month high pace of 5.9% in May but is expected to decelerate in June.
“With the dip in the core sector growth, we expect the IIP to post a rise of 3.5% to 5.0% in June 2024,” said Aditi Nayar, chief economist at ICRA.
“The decline in core sectors’ growth during June could possibly be attributed to lower spending on Government capex before the general elections and the slowdown in construction activity which has led to a temporary slack in demand for steel and cement,” reckoned Suman Chowdhury, chief economist and head of research at Acuité Ratings & Research.
