📷 Image Credits: Moneycontrol
India’s core sector growth eased to 6.3% in May 2024, compared to the revised figure of 6.7% in the previous month. The growth was led by significant output increases in coal, electricity, and steel, while cement and fertilizers saw negative growth. The data released by the government on June 28 highlighted the impact of various factors such as the heatwave and Parliamentary Elections on sector activities.
Aditi Nayar, chief economist at Icra, mentioned that the combination of these factors could have limited activity and execution in certain sectors, leading to the slight moderation in core sector growth. The Index of Eight Core Sector Industries, which measures key sectors like cement, coal, electricity, and steel, plays a crucial role in the overall Index of Industrial Production.
Experts predict that the easing growth in core sectors could hamper industrial expansion, with expectations of IIP growth print ranging from 4-5% in May. While some sectors showed robust performance, three out of the eight industries contracted in May, indicating a mixed performance across different sectors.
The power sector saw a significant 12.8% growth, attributed to the heatwave increasing electricity demand. The coal sector also expanded by 10.2%, driven by higher power generation. However, cement and fertilizers continued to face contraction for the fifth consecutive month and the second month, respectively.
Notably, the crude oil sector, which had shown positive growth for the past four months, contracted in May. Economists highlighted that while there have been improvements in the output of coal, crude oil, and refinery products compared to the pre-COVID levels, sustained recovery remains a distant possibility.
Looking ahead, as the government gears up to present its budget, there is anticipation for continued focus on capital expenditure to boost infrastructure growth. Industry demands for increased capex spending and improvements in tax devolution to states for sustained growth. With the RBI revising the FY25 growth forecast upward to 7.2%, there is optimism regarding India’s growth prospects in the coming months.
