July core growth down to 5.4% as iron ore, power lose steam
India’s core sector growth slowed to 5.4% in July from 6% in June, with weaker iron ore, steel and electricity output and contractions in fertiliser and crude oil. Cement and coal production strengthened. Despite the monthly slowdown, April-July growth rose to 4.3% from 1.5% a year earlier. Economists expect core and industrial output growth to moderate further due to base effects.
India's core sector output expanded by 5.4% year-on-year in July, down from 6% in June, according to official data released on Thursday. The slowdown was driven by weaker growth in iron ore, electricity, and steel production, while fertilizer and crude oil output contracted. This marks the second release under a revised index with 2022-23 as the new base year, which now includes iron ore, raising the number of core industries to nine.
The updated series shows that India Ratings and Research (Ind-Ra) anticipates core industry growth to further decelerate to below 5%, primarily due to an unfavorable base effect. Despite the slowdown, cumulative growth during April-July reached 4.3%, compared to 1.5% in the same period last year.
Iron ore production led the growth, increasing by 29.5% in July, though it slowed from 44.5% the previous month. This growth, however, contributed to a 95 basis point downward pressure on the core output figure for July compared to the prior month. Fertilizer production declined for the fifth consecutive month, falling 8% year-on-year in July, largely due to the impact of the West Asia conflict and supply-side issues such as reduced gas supply and high energy costs.
Crude oil output fell by 5.3% in July, while natural gas output decreased by 3.7% over the same period. Cement production, however, reached a seven-month high of 13.1% year-on-year in July, up from 9.9% in the previous month. This growth was likely due to the replenishment of inventory after the extended period of construction activity in June, driven by the significant monsoon deficit that month.
Steel output grew by 2.9% year-on-year in July, slightly lower than the 5.6% increase in June. Coal production expanded to an 11-month high of 7.6% in July from 1.4% in June, while electricity production increased by 9% compared to 11.4% in the previous month. Ind-Ra projects core industry growth to moderate to 6-6.5% in July, while ICRA expects it to be less than 6%, compared to the 7.3% growth in June.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
