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Core sector growth up 3.6% in May from 2.8% in April on energy push

Business Standard:  July 03, 2017

New Delhi:  Core sector output rose by 3.6 per cent in May, up from the 2.8 per cent rise the previous month of April.

The improving pace of growth, counted year on year, was primarily led by the electricity sector supported by refinery products and natural gas.

Data released by the Commerce and Industry Ministry on Friday also showed that the eight core industries — coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity — had cumulative growth of 3.2 per cent in the first two months of the current financial year.

This is less than half the 6.9 per cent growth that was seen in the corresponding period of previous year of 2016-17.

Contributing 40 per cent to the total industrial production, core sector output had dipped in April mainly due to tepid growth across sectors apart from steel, electricity and fertilizers.

In May, electricity sector output had the highest growth rate, going up by 6.4 per cent as compared to the 5.4 per cent rise seen in the previous month.

On the other hand, refinery products bagged the second highest growth rate of 5.4 per cent, reversing a trend which saw it having very low or negative growth over the last 4 months.

Similarly, natural gas production also rse by 4.5 per cent up from the 2 per cent rise in the previous month.

However, the same was not true for crude oil production, which rose by a paltry 0.7 per cent after the 0.6 per cent contraction seen in April.

Coal production continued to contract by 3.3 per cent for the second consecutive month. “The continued contraction in coal output in May 2017 is likely to reflect inventory management, following the double-digit growth in March 2017.” Principal Economist at ICRA, Aditi Nayar said.

Also, after the prolonged contraction in cement output for five months, the sector recorded a modest growth in May 2017, which may portend a nascent turnaround in construction activities.

ICRA expects cement demand growth to recover to around 4-5% during FY2018, driven by a pick-up in the housing and infrastructure segments, particularly, road and irrigation, Nayar added.

Economists suggested an unfavorable base effect went against prospects of growth in fertilizers and steel output.

Fertilizer production again contracted in May, going down by 6.5 per cent. The sector had seen four consecutive months of contraction until April when it had risen by 6.5 per cent.

Growth in steel production also fell to 3.7 per cent from the 9.3 per cent growth seen in April.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.