The core industries’ growth for the month of July was down to 1.1 percent dragged by decline in steel prodcution and coal output. The eight core sector industries include coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity.
Sector-wise, coal production grew only 0.3 percent versus 6.3 percent M-o-M, crude oil production was down 0.4 percent versus 0.7 decline M-o-M percent, natural gas production was down 4.4 percent against decline of 5.9 percent M-O-M, petrol refinery production output was up 2.9 percent as against 7.5 percent increase M-o-M. Fertiliser production was up 8.6 percent versus 5.8 percent increase M-o-M, steel production was down 2.6 percent as against 4.9 percent increase M-o-M, cement production was up 1.3 percent versus 2.6 increase M-o-M and electricity production was up 3.5 percent as against increase of 2.6 percent M-o-M.
The Arpil to July eight core industries growth was up 2.1 percent year on year.
Reacting to the numbers, Shubhada Rao, Chief Economist, Yes Bank said the number came in much lower than their estimate of 2.5-3 percent, due to slowdown in coal and steel production, although downside on steel was widely anticipated due to dumping issues etc.
“Overall it is a negative number to look at particularly when we feed this into Index of industrial production (IIP) estimates; it would lead to some downside on our IIP numbers as well. It is a day of heavy data. I think the fiscal data has also come,” said Rao in an interview to CNBC-TV18.
However, the key positive that we still take out of fiscal data is continued thrust on capital expenditure (capex) by the government, said Rao. “We have seen decent traction in quite a few ministries over the last quarter. Now we have almost three or four months of capex data from the government side and we see it in energy, the nuclear energy overall power sector, we see it coal, we see it is micro, small and medium enterprises (M SME ), urban development, food processing,” she added.
According to her the capex thrust is good because it was anticipated that the capital activity would be more on the shoulders of the government and not the private sector. However, for all of this to manifest in headline numbers in terms of broad data on GDP would take a quarter or two, said Rao.
The cumulative data (see table below) shows for the first four months that is April to July 2015-16, the combined growth came in at 2.1 percent as against 5.5 percent last year.
According to Care Research report, the industrial growth in July prima facie would be muted again. While it could be around 2%, due to the high volatile nature of these numbers which are also susceptible to revisions, overall growth for 4 months would be in the 3-3.5% range provided consumer and capital goods witness some momentum. The base effect could help capital goods display higher growth.
One would still have to wait till September-October to discern any definite trends, says the report.