Core Sector Growth Slows To 3.6% In May

According to official data, the Index of Eight Core Industries (ECI) had risen by 4.6% in April and 3.9% in May 2017.

Core Sector Growth Slows To 3.6% In May

Core sector's cumulative growth during April to May, 2018-19 was 4.1%.

Unfavourable base effect, along with lower production of steel, crude oil and cement decelerated India's eight major industries' output in May 2018, official data showed on Monday. According to the Ministry of Commerce & Industry, the Index of Eight Core Industries (ECI) had risen by 3.6 per cent during the month under review slower than the rise of 4.6 per cent in April and 3.9 per cent in May 2017. "The combined Index of ECI stands at 131.4 in May, 2018, which was 3.6 per cent higher as compared to the index of May, 2017," the ministry said in a statement.

"Its cumulative growth during April to May, 2018-19 was 4.1 per cent."

The ECI index represents major sectors like coal, steel, cement and electricity. It carries 40.27 per cent weightage of the Index of Industrial Production (IIP), which is the macro gauge for India's factory output.

On a sector-specific basis, refinery products, which has the highest weightage of 28.03 per cent, grew by 4.9 per cent in May 2018 compared with the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85, picked up by 3.5 per cent.

Steel production, the third most important component with weightage of 17.92, inched up by 0.5 per cent during the month under review, whereas coal mining, with a 10.33 weightage, edged higher by 12.1 per cent.

On the other hand, extraction of crude oil, which has an 8.98 weightage, declined by (-)2.9 per cent during the month under consideration.

The sub-index for natural gas output, with a weightage of 6.88, slipped by (-)1.4 per cent.

Cement production, which has a weightage of 5.37, edged higher by 5.2 per cent in May 2018.

Fertiliser manufacturing, which has the least weightage -- only 2.63 -- edged-up by 8.4 per cent during the month under review.

ICRA Principal Economist Aditi Nayar said: "The slide in the pace of growth of steel and cement, in conjunction with an unfavourable base effect, was the chief driver of the sequential dip in core sector expansion to a 10 month low in May 2018." 

"Disaggregated data reveals mixed trends, with a sequential rise in growth of electricity, fertilizers and refinery products, accompanied by a decline in the pace of expansion of five items as well as contraction in two of the eight constituents, namely crude oil and natural gas." 

Nayar pointed out that double digit growth in coal output remained the largest driver of core sector expansion in May 2018.

"A glance at the growth of various segments of the core sector over the past one year suggest that there is significant variation across different segments of core sector on monthly basis," said India Ratings and Research's Director for Public Finance and Principal Economist Sunil Kumar Sinha.

"This suggests that core sector growth is still not on firmer footing and somehow better performance of one or the other segment is keeping the growth at moderate levels."

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