Ahead of the meeting of the Monetary Policy Committee on Tuesday, latest official data of core industries show a further slowdown in production that could also have an impact on factory output.
The index of eight core industries grew at its slowest pace since February at a meagre 0.4 per cent in June this year as against a robust 7 per cent expansion in June 2016. It grew by 4.1per cent in May.
The data, released on Monday showed that the worst performers were coal mining and cement production that contracted by 6.7 per cent and 5.8 per cent respectively in the month. Fertiliser production also declined by 3.6 per cent in June.
Production of natural gas registered a growth of 6.4 per cent in June as against a year ago, while steel production grew by 5.8 per cent.
“The cumulative growth of the eight industries during April to June, 2017-18 was 2.4 per cent,” said an official release.
The Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
Inflation at all-time low With retail and wholesale inflation at an all time low in June, industry and the Finance Ministry is hoping for at least a 25 basis point reduction in the repo rate.
The MPC, led by the Reserve Bank of India, will announce the decision on Wednesday.
In the second bi-monthly monetary policy review on June 6 and 7, the committee had left lending rates unchanged at 6.25 per cent while reducing the statutory liquidity ratio by 0.5 per cent. Analysts attributed the low growth of core sector in June to a high base effect.
“It points to a subdued picture for industrial growth for June 2017, with the sequential decline in growth of non-oil exports, core sector output and automobile production.
“An unfavourable base effect and inventory trimming prior to the onset of the goods and services tax may contribute to a year-on-year contraction in industrial output in June 2017,” said Aditi Nayar, Principal Economist, ICRA.