India's core sector growth slows to 7-month low
What's the story
India's core sector growth has slowed down sharply to a seven-month low of 0.5% in May, data released by the government showed. The figure is a sharp decline from April's 1.8%. The slowdown was largely due to weakness in energy-related sectors such as coal, crude oil, natural gas, and petroleum refinery products. These sectors account for over 40% of the Index of Industrial Production (IIP).
Sector performance
Broad-based contraction in fuel and mining segments
The slowdown in India's core sector was mainly driven by a broad-based contraction in fuel and mining segments. Coal production fell by 9.3% in May, compared to an 8.8% decline in April. Crude oil production contracted by 4.6%, while natural gas output fell by 4.9%. Petroleum refinery products saw the sharpest deterioration, plummeting by 8.7% in May from a marginal decline of 0.5% recorded earlier last month, indicating significant stress on downstream energy production activities across India.
Sector resilience
Construction-linked sectors show some resilience
Despite the overall slowdown, construction-linked sectors showed some resilience. Cement output grew by 8.4% in May, slightly up from April's 8.2% growth rate. Steel production also rose by 5%, while electricity generation accelerated to 8.7% from April's 5.6%. This performance made electricity generation the strongest contributor to headline growth.
Recovery indicators
Core sector growth had improved in April
Earlier this year, core sector growth showed signs of recovery, rising from 1.2% in March to 1.8% in April. However, the sharp moderation in May suggests that the recovery may have stalled for now. The sector had witnessed strong expansion late last year, peaking at 6.5% in August before slowing down due to persistent weakness in fossil fuel production and uneven industrial demand.