Eight core sector growth sees a slight bump, dips to 6.6% in July

On the energy side, coal production maintained growth, despite the rate of rise falling for the third straight month

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Subhayan Chakraborty New Delhi
Last Updated : Sep 01 2018 | 1:54 AM IST
The eight core sectors of the economy saw a slight bump in its growth path in July, rising 6.6 per cent, down from an updated 7.6 per cent in June. Contributing 40 per cent to the total industrial production, output of the core sectors saw lower growth across five sectors as compared to June. 

Data by the commerce and industry ministry on Friday showed the eight segments — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — cumulatively grew 5.8 per cent in the first four months (April-July) of the financial year. This was more than double the 2.6 per cent growth in the corresponding period of FY18.

“Crude oil and natural gas displayed a contraction; cement, refinery products and coal recorded healthy expansion in July. The pick-up in steel sector growth to an eight-month high in July is also encouraging," said Aditi Nayar, principal economist at rating agency Icra.


The headline figures suggest an impending moderation in the Index of Industrial Production (IIP) numbers for July, economists believe. "An easing in growth of core sector output and automobile production, as well as an unfavourable base effect, point towards this," Nayar added. 

Cement production was upstaged by growth in refinery products, which was the biggest growth puller in June, rising 12.3 per cent. Refinery items built on the 12.1 per cent growth in the previous month, progressively rising in the current financial year. 

On the other hand, growth in cement production continued to swing. The sector saw growth reduce to 10.8 per cent in July, from a 13.2 per cent rise in June. The Centre’s focus on infrastructure building has led to cement production maintaining double-digit growth for the past nine months, despite wild swings. "Higher infra activity, mainly from the government, will be the main driver of cement production, coupled with some modicum of restocking after GST implementation," said Madan Sabnavis, Chief Economist at CARE Ratings.


On the energy side, coal production maintained growth, despite the rate of rise falling for the third straight month. Production expanded by 9.7 per cent in July, down from the 11.8 per cent rise in the previous month. As a result, electricity generation also took a hit, halving to 4.8 per cent in July, down from the 8.4 per cent rise in June.

Other broad fuel components continued to do badly. Crude oil output contracted for the eighth straight month, going down 5.4 per cent, compared to 3.4 per cent in June. The same trend was true for natural gas production, which contracted for the third straight month, with output remaining a negative 5.2 per cent. 

Elsewhere, fertiliser production rose 1.3 per cent, improving on the 1 per cent rise in June. Growth in steel production rose to 6 per cent from the 3.4 per cent in June. 


Core sector growth is set to continue for the rest of the financial year. The country’s industrial output jumped seven per cent in June to a five-month high, due to a boost in manufacturing growth as well as an uptick in capital goods production. The sensitive capital goods segment, which connotes investments, saw output rise 9.6 per cent. This was a departure from the declining pace of growth in capital goods production.
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