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June core output at 3-month high on steady govt capex

June core output at 3-month high on steady govt capex

Economic Times3 days ago
Synopsis
India's core sector shows growth. Output reached a three-month high in June at 1.7%. Government spending on infrastructure supported this growth. Steel and cement production increased. Refinery products also saw gains. However, coal, natural gas, electricity, crude oil, and fertilizers declined. Experts predict further improvement in July. Industrial activity may be impacted.
ANI Representative Image New Delhi: India's core sector output grew to a three-month high of 1.7% in June, driven by sustained government capital expenditure that supported infrastructure-related sectors, even as five of the eight core industries recorded contraction, official data released Monday showed. The growth was 1.2% in May and 5% in June 2024."Steady government capex, along with the reasonable growth in steel, cement and refinery products pulled up the infrastructure output to a three-month high," said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra).The steel output surged to a seven-month high of 9.3% in June, while cement production increased by 9.2%, due to a favourable base effect.
"The growth in volumes of these segments has been quite healthy in Q1FY26, which implies that the construction sector is poised to record a robust GVA (gross value added) growth in the quarter," said Aditi Nayar, chief economist at ICRA. Official GVA figures for the June quarter will be released in August.
Output of refinery products grew to a five-month high of 3.4% year-on-year.The strong performance of these three sectors helped prevent a contraction in core sector output, offsetting decline in other five industries - coal (6.8%), natural gas and electricity (2.8% each), and crude oil and fertilizers (1.2% each)."While an elevated base weighed upon coal output, excess rains in the latter half of June impacted electricity generation," explained Nayar.Jasrai added that the swift progression of the southwest monsoon across the country along with a high base effect were some of the reasons.On average, core sector output averaged 1.3%, lower than 6.2% in the corresponding period last year.Looking ahead, Ind-Ra projects core sector output to improve further to around 2% year-on-year in July.Since the eight core industries account for 40.27% weight in the Index of Industrial Production (IIP), economists expect the tepid growth in core sector output to impact industrial activity as well.Industrial output grew by 1.2% year-on-year in May from 2.6% in April, according to official data released last month. Estimates for June will be released on July 28.Ind-Ra anticipates IIP growth to remain around 1.5% in July, while ICRA expects 1.5-2.5%.
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