Core sector growth slows to 3-mth low of 4.1% in March

NEW DELHI: Growth in eight key infrastructure segments slowed to three-month low in March, dragged down by sluggish output from crude oil, natural gas, refinery products and fertiliser sectors.


Data released by the commerce and industry ministry on Tuesday showed the eight core sectors spanning coal, steel, cement, electricity, crude oil, natural gas, refinery products and fertiliser grew an annual 4.1% in March, slower than previous month’s 5.4% and lower than 5.2% in March 2017.

Growth in the sector for 2017-18 was 4.2%, slower than 4.8% posted in the year earlier period.

The eight core sectors account for 40.3% of the index of industrial production and serve as an advance indicator of the performance of industrial output data to be released later in the month.

Crude oil output contracted 1.6% during March, while natural gas grew an annual 1.3%. Refinery products rose 1%, while fertiliser sector grew 3.2%.

The coal sector rose a robust 9.1%, while the cement sector increased 13% in March. The steel sector grew 4.7% and electricity rose 4.5%.

“The impact of fading of favourable base effect on the moderation in

core sector growth

in March 2018 was tempered by the surge in coal production that appeared to be led by an attempt to meet year-end targets,” said

Aditi Nayar

, principal economist at ratings agency ICRA.

Nayar

said a waning of the favourable base effect contributed to the considerable moderation in growth of cement output to 13% in March 2018 from 23% in the previous month.

“Cement output expanded by a five-year high 6.3% in FY-18, marking a turnaround relative to the contraction of 1.2% in FY-17. Moreover, cement was the fastest growing of the eight core sectors in FY-18. Increased budgetary support for affordable housing, rural economy and infrastructure are expected to support cement demand in FY-19,” she said.

“The trend in growth of core sector output, auto production and non-oil merchandise exports, as well as the unfavourable base effect, suggest an impending dip in the pace of expansion of

IIP

below 7% in March 2018, after a gap of four months,” Nayar added.

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