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Pulled down by the under-performance of electricity, steel and cement sectors, the eight infrastructure industries’ output contracted 0.4 per cent in April this year. Only the coal and steel sectors recorded positive growth.
This is the second straight month of contraction – after the 0.1 per cent decline in March 2015 – for the eight core industries that have about 38 per cent weightage in the Index of Industrial Production (IIP). The eight core industries are coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity.
The latest core industries’ print was substantially lower than the now upward revised growth rate of 5.7 per cent for April 2014 (it was earlier estimated at 4.2 per cent).
The only comforting feature was that the coal sector, which recently saw a slew of reforms, recorded 7.9 per cent growth in April 2015, higher than 6.2 per cent growth in April last year.
Pervasive slowdown The fact that six of the eight core industries contracted in April 2015 shows the pervasiveness of the slowdown that has led to the sector’s worst performance since April 2005, said Aditi Nayar, Senior Economist, ICRA. She said moderation in consumer price index inflation suggests a high likelihood of a repo rate cut on June 2.
However, monetary easing is unlikely to brighten the outlook for most of the core industries, whose performance is afflicted by factors such as supply side constraints and lack of import competitiveness, Nayar added.
Anis Chakravarty, Senior Director, Deloitte in India, said that the Reserve Bank of India was unlikely to be guided by the latest core sector performance in its policy review on June 2.
However, a 25 basis point cut should come about, given that credit offtake is weak and there is a need to boost aggregate demand, he told BusinessLine .
Electricity generation contracted for the first time in the last 12 months at 1.1 per cent in April, against 11.9 per cent in April last year.
While steel output grew 0.6 per cent, cement output fell 2.4 per cent in April this year. Natural gas output contracted in April at 3.6 per cent, lower than the 7.7 per cent contraction in April last year.
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