Eight central sectors show moderate growth in July
NEW DELHI: Growth in eight central sectors remained slow in July, driven by contraction in four of the eight segments of the infrastructure sector, highlighting the slowdown facing several areas of the economy.
Data published by the Ministry of Commerce and Industry on Monday showed that eight major sectors, which include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity, grew 2.1% in July, more than the one reviewed up 0.7% in June but below the 7.3% expansion published in the same month last year.
The accumulated growth during April-July was 3%, less than 5% in the same period last year. The central sector represents 40.3% of the industrial production index and is related to industrial production data, which will be published in the middle of the month.
“Data from the central sector offered mixed signals, with the moderately healthy growth of cement and steel production juxtaposed against interannual contraction in four indices, namely coal, crude oil, natural gas and refinery production. A rebound in government spending after the union budget can support cement and steel production in the coming months, said Aditi Nayar, principal economist at the credit rating agency ICRA.
Based on the best performance of the central sector and exports of non-oil merchandise, we expect industrial growth to increase modestly in July 2019, led by manufacturing, even when mining and electricity would register a sequential weakening, Nayar said.
The latest slow data add to the GDP data for the June quarter, which pointed to a sharp slowdown in the economy as growth plummeted to a minimum of 6 years of 5%. The key manufacturing sector slowed to a minimum of two years by 0.6%, well below the 12.1% growth in the first quarter of the last financial year, indicating a decrease in demand facing the corporate sector.
While the government has presented a series of measures to address the slowdown, experts say more steps, including a fiscal stimulus, are needed to revive growth. The government received a transfer of Rs 1.76 lakh crore from the Reserve Bank of India and it is expected that some of the money can be used to boost growth.
Separate data showed that manufacturing activity fell to a minimum of 15 months in August due to a slower increase in sales, production and employment.
With 51.4 in August, the IHS manufacturing PMI Markit India fell from 52.5 in July to its lowest mark since May 2018, and below its long-term average of 53.9. The 50-point mark separates the expansion from the contraction.