India's Core Sector Growth Slows To 20-Month Low In June

New Delhi, Aug 1 (KNN) India's eight core industries, which account for 40 per cent of the Index of Industrial Production (IIP), experienced a significant slowdown in growth during June 2024.

The core sector growth rate declined to 4 per cent, marking a 20-month low, compared to 6.4 per cent in May and 8.4 per cent in June 2023.

The first quarter of the fiscal year saw overall growth of 5.7 per cent, down from 6 per cent in the same period last year.

This deceleration was primarily driven by a slowdown in five of the eight key industries including crude oil, refinery products, steel, electricity, and natural gas.

Coal maintained strong performance with 14.8 per cent growth, while cement rebounded to 2.7 per cent growth after contracting in May.

However, steel growth sharply declined to 2.7 per cent from 6.8 per cent in May, and electricity growth nearly halved to 7.7 per cent.

Economists suggest that this slower core sector growth may impact overall industrial production. ICRA, a credit rating agency, projects June's Index of Industrial Production growth between 3.5-5 per cent, following May's 5.9 per cent increase.

Despite the current slowdown, experts remain optimistic about India's economic outlook. The Reserve Bank of India recently revised its growth forecast upward to 7.2 per cent for the fiscal year, while the International Monetary Fund projects 7 per cent growth. The government's Economic Survey estimates growth between 6.5-7 per cent.

Factors contributing to this positive outlook include normalised monsoon conditions, a relatively benign global economic environment, and reduced electoral uncertainty.

The government's commitment to capital expenditure, maintaining its target at Rs 11.11 lakh crore in the recent budget, is expected to support growth in the construction and infrastructure sectors.

Economists anticipate a potential rebound in coming months, particularly in steel and cement sectors, as government spending on capital expenditure is likely to increase post-elections.

Additionally, the recent tax devolution to states is expected to boost state-level capital expenditure, further supporting economic growth.

(KNN Bureau)