Core sector growth slows to 4.1% in March, down from Feb's 5.3%

Growth in combined output of the economy's eight core sectors slowed in March to 4.1 per cent, down from 5.3 per cent in February and 6.1 per cent in January.

The March growth was largely a result of persistent rise in cement production, up 13 per cent, and a sudden 9.1 per cent growth in coal output. Apart from these, the sectors comprising crude oil, natural gas, refinery products, fertiliser, steel and electricity make the core sector grouping. Their contribution is about 40 per cent to total industrial production.

In March, five sectors performed less well than a month earlier. Data issued by the commerce and industry ministry on Tuesday showed cumulative growth for the core sector was 4.2 per cent in 2017-18 (the financial year ends March 31), lower than the 4.8 per cent growth in 2016-17.

Double-digit rise in cement production has solidified overall growth for five straight months.

“More, cement was the fastest growing of the eight core sectors in FY18. Increased budgetary support for affordable housing, the rural economy and infrastructure are expected to support cement demand in FY19, too,” said Aditi Nayar, principal economist at ratings agency ICRA.

Coal, the next-best performing sector, saw output growth at a six-month high in March. Even so, growth of electricity generation eased mildly in March to 4.5 per cent, relative to the February levels, Nayar added. According to data from the Central Electricity Authority, hydropower generation contracted by 11.4 per cent. With a decline in reservoir levels, this is likely to continue falling over the next few months.

Steel, the other major pillar of the construction sector, saw production grow by 4.7 per cent, down from the five per cent rise in February. 

Experts suggest favourable domestic demand and remunerative prices at home and abroad are likely to bolster production growth in the near term, although the risk of trade wars could affect export and import.

In energy, crude oil output contracted by 1.6 per cent in March, after another of 2.4 per cent in February. Natural gas production. however, rose 1.3 per cent, reversing a contraction of 1.5 per cent in February. Experts said this might kickstart a growth spell in the sector, after hits every month since September 2017, when it had risen to 6.3 per cent. Crude oil has seen low or negative growth for the past one year.
As a result, growth in refinery products fell to one per cent, from February's 7.8 per cent. 

“Sequential decline in core sector growth in March is mainly explained by decline in refinery products production,” said Devendra Pant, chief economist at India Ratings and Research. 

Based on this, growth in the primary goods category within the Index of Industrial Production is expected to  be marginally weaker for March, even as consumption growth compensates, he added.

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