India’s core sector growth eased to 20-month low of 4 percent in June, from 6.4 percent in the previous month, as five of the eight industries witnessed a slowdown in growth from the previous month.

The first quarter growth was also lower at 5.7 percent compared with 6 percent in the first quarter of the previous year.

The combined Index of Eight Core Sector Industries measures the output of key sectors - cement, coal, crude oil, electricity, fertilisers, natural gas, refinery products and steel - which have a 40% weight in the Index of Industrial Production (IIP).

While coal, cement and fertilisers witnessed a pick up in activity compared with the previous month, the other five industries witnessed a slowdown with two sectors—crude oil and refinery products—witnessing a contraction.

Coal retained its double digit growth for second month in a row, rising 14.8 percent in June compared with 10.2 percent in the previous month. On the otehr hand, cement grew at 2.7 percent from 1.6 contraction witnessed in May.

Steel slowed sharply to 2.7 percent from 6.8 percent in the previous month, and electricity growth nearly halved to 7.7 percent.

Sequentially, the eight core industries contracted 3.1 percent.

Outlook improving

The Indian economy is likely to perform better than earlier expected, carrying the momentum from the previous fiscal.

Reserve Bank of India recently revised India’s growth forecast upward to 7.2 percent from 7 percent expected earlier.

The International Monetary Fund also expects the economy to grow at 7 percent compared with 6.8 percent projected earlier.

The Economic Survey released on July 22 pegged growth at 6.5-7 percent.

The National Council of Applied Economic Research in its monthly economic outlook noted that growth could inch higher than 7 percent in the current fiscal.

“Based on the momentum in the high frequency indicators; normalised monsoon; a relatively benign global outlook; and receded electoral uncertainty, both in India and in the rest of the world, growth will likely turn out to be higher than 7 percent, and possibly closer to 7.5 percent,” said Poonam Gupta, director general, NCAER.

The government kept its capital spending target unchanged at Rs 11.11 lakh crore in the Bugdet presented on July 23.