With depressed prices, mining is biggest laggard

The domestic mining sector turned spoilsport for the country’s growth numbers.

The sector churned a gross value addition (GVA) of just 1.3 per cent in the GDP for FY17 till December 2016, according to CSO data. Comparably, it grew 12.3 per cent in the corresponding period of FY16.

The Central Statistical Organisation categorises coal, crude oil and natural gas production under the mining and quarrying sector. It estimates a 2 per cent GVA growth in coal production till December in FY17. Comparably, coal production GVA grew 4.5 per cent in the same period last fiscal.

Economists explain that the lowered GVA projections for mining are linked to depressed prices. Aditi Nayar, economist at ICRA, said: “Commodity prices were depressed for the first two quarters of the fiscal. There was a recovery in the third quarter and this was a reason for the better GVAs.”

Crude oil production GVA fell 3.2 per cent while natural gas GVA dipped 3.3 per cent in the first nine months of FY17, against a decline of 0.8 per cent and 2.8 per cent respectively in FY16.

NR Bhanumurthy, Professor at the National Institute of Public Finance and Policy, said the lowered GVA is also due to a change in the country’s energy mix.

“The lowered projections for coal GVA is linked to the rising infusion of renewable energy into the total energy mix of the country,” he said.

The GVA from electricity, gas, water supply and other utility services grew 6.6 per cent (5.1 per cent). Explaining that GVA of power is likely to grow further, Chief Economist at India Ratings Devendra Kumar Pant said: “As industrial growth picks up, the demand for power will too and this is reflected in the higher GVA.”

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