July core sector output growth bounces back to 2.4% from 0.8% in June

Acceleration driven by steel production, electricity generation

Core sector output growth rose to 2.4 per cent in July, as compared to the paltry 0.8 per cent rise seen in June.

Growth was primarily pushed by a jump in steel and electricity generation, apart from a sustained rise in natural gas output.

Data issued by the commerce and industry ministry on Thursday showed the eight core segments - coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity - cumulatively grew 2.5 per cent in the first four months (April-July) of this financial year. This was less than half the 6 per cent growth in the corresponding period of 2016-17.

Contributing 40 per cent to total industrial production, growth in core sector output had been pulled down by contraction or marginal growth in six of the eight major sectors to 0.8 per cent after rising by 4.1 per cent in May.

In July, steel production continued to firm up, rising by 9.1 per cent, up from the 5.8 per cent rise in June.

Also, electricity generation managed to rise by 5.4 per cent up from the 2.2 per cent rise in June, reflecting a favorable base effect, as well as some improvement in industrial demand post-GST, Principal Economist at ICRA, Aditi Nayar said.

"Data released by the CEA indicates a rebound in thermal electricity generation to a growth of 4.2% in July 2017 from the contraction of 1.6% in June 2017. However, the pace of growth of hydro electricity generation moderated sharply to 2.2% in July 2017 from 11.2% in June 2017." she added.

The final push to growth was provided by natural gas, which saw production rise by 6.6 per cent, maintaining a steady trend since April. It grew 6.4per cent in June.

This is where good news ended as all other sectors showed minimal or negative growth. After three straight months of contraction, coal production managed to rise by the slowest pace of 0.7 per cent after contracting by 6.7 per cent in June.

Crude oil production growth, rising by the slowest margin among all sectors for months, turned negative by contracting 0.5 per cent in July from the 0.6 per cent rise in June.

Cement production continued falling in July, albeit by a smaller margin of 2 per cent, from the 6.3 per cent fall in June. The sector has seen prolonged contraction for eight straight months now.

Contraction in refinery products rose to 2.7 per cent from the 0.2 per cent seen in July. It had risen by 5.4 per cent in May, reversing a trend of very low or negative growth for four months.

Finally, fertiliser production again contracted in June, going down by 0.3 per cent after a 3.6 per cent decline in June.