Power woes hit infra sector, growth slows down to 3% in June

  • HT Correspondent, Hindustan Times, New Delhi
  • Updated: Aug 01, 2015 01:29 IST

India’s infrastructure output growth slowed to 3% in June, pulled down by a slowdown in electricity production, latest data released on Friday showed.

The eight ‘core industries’, which account for 38% of the overall index of industrial production (IIP), a proxy to measure factory output, had grown 4.4% year-on-year in May.

The growth rate was much higher a year ago at 8.7% in June 2014.

Electricity production grew at annual 0.2% in June, sharply slower than 5.5% in the previous month.

The latest data comes three days ahead of the Reserve Bank of India’s monetary policy review with business leaders demand more interest rate cuts to bring down their cost of capital and aid investment and job growth.

The RBI, which has cut its key lending rate — repo rate — three times since January, will present its next bi-monthly monetary policy review on Tuesday.

Crude oil and natural gas production declined by 0.7% and 5.9%, respectively in June this year, compared to the previous month’s 0.8% and (-)3.1% respectively.

Aditi Nayar, senior economist at credit rating and research firm ICRA, said the sequential dip in core sector growth in June 2015 is largely driven by an adverse base effect related to electricity generation, and is therefore not a cause for alarm.

Coal, steel and cement output growth slowed to 6.3%, 4.9% and 2.6%, respectively, during June.

“The pickup in growth of steel production for the third consecutive month in June 2015 is encouraging. Although, the rise in coal output tapered from 7.8-7.9% in the first two months of 2015-16, it remained relatively healthy at 6.3% in June 2015,” Nayar said.

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