Core sector growth slows to 2.6% in April

The eight core industries’ growth slowed to 2.6 per cent during Aprilcompared to 4.7 per cent in April 2018.

The slow down was because of a slump in government spending due to lower than anticipated tax collections. Madan Sabnavis, Chief Economist at CARE Ratings, said, “Due to the slow movement in capital expenditure of the government the core sector growth has been slower at 2.6 per cent. Steel and cement have grown at slower rates though cement was affected by base effect. This also means that the Index of Industrial Production growth will be subdued in the range of 2-2.5 per cent. .”

The eight core industries — steel, coal, electricity, cement, refinery production, crude oil, natural gas and fertiliser — comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

“The overall level of expenditure has been pruned mainly due to fall in tax revenue — both direct and indirect. The lower GST collections and corporate tax collections have contributed to this. A repercussion is that the government has cut back on capital expenditure by around ₹13,000 crore which has affected overall investment in financial year 2019 given that it was the major driver of investment in the country,” Sabnavis said.

“The focus in 2019-20 will be to ensure that revenue increases as the expenditure outlays on capital expenditure has to increase as would the revenue expenditure due to the cash transfers to farmers,” he added.

Steel, coal, electricity, cement and refinery production drove up the index while crude oil, natural gas and fertiliser were the laggards in April 2019.

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