Core sector growth touches a 50-month low

In the month of June’19, core sector growth registered for India was merely 0.2%, the lowest in more than four years, when it saw a 0.5% contraction in April 2015. The growth recorded in May’19 was 4.3%. This tepid growth indicates an economic slowdown and the lack of pickup in investment, as witnessed in the slide in the performance of steel and cement. The 8 infrastructure industries (coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity) account for 40.27% in the index of industrial production (IIP). Decline in cement production, slowdown in steel sector and maintenance-related disruption in June are some of the factors responsible for this development. The base effect of high growth in June 2018 (a whopping 7.8%) augmented the slowdown.

“The deceleration in steel and cement segment growth probably reflect the narrative of weak demand in auto and construction segments, but is also caused by high effect. The core sectors are a significant component of the IIP, and suggest low growth in that Index as well,” noted Axis Bank’s chief economist, Saugata Bhattacharya.