NEW DELHI: After two months of successive decline, the output of eight key infrastructure sectors expanded by 4.4 per cent in May, indicating a recovery in industrial activity. This marks the highest growth rate in the past six months. The index of these eight core sectors grew by 3.8 per cent in the same month last year.
According to the Commerce Ministry data, the cumulative growth rate of the eight core industries – coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity – during the first two months of the fiscal came down to 2.1 per cent compared to 4.7 per cent during April-May 2014-15.
The eight core industries, which are a lead indicator for industrial production comprising nearly 38 per cent of the weight of items included in the Index of Industrial Production (IIP), had recorded a growth of 6.7 per cent in November last year.
Madan Sabnavis, chief economist, CARE Ratings said, “With such an improvement in the core numbers, I expect the May IIP to be somewhere between 3-4 per cent. However, there may not be correlation between IIP and core all the time. But it will be too early to call this as a recovery of the Indian industry.”
“The considerable improvement in the core sector growth would support a pick up in the pace of industrial expansion in May 2015, although the extent of the same would be tempered by factors such as an adverse base effect, contraction of non-oil merchandise exports and automobile production trends,” said Aditi Nayar, senior economist at ICRA.
“Core sector recorded its highest level of growth in the last six months in May. However, growth has been weak in the core infrastructure industries and, as such, data in the coming months would be crucial in determining if we are indeed witnessing a sustained turnaround,” said Rishi Shah, economist, Deloitte.
“The growth in steel production is encouraging but given the situation of the domestic steel industry and global demand outlook, going forward these numbers need to be looked at carefully,” Shah added.