Base effect and contraction in crude oil and natural gas decelerates India's industries

The unfavorable base effect, along with a contraction in crude oil and natural gas production sequentially decelerated India's eight major industries' output in July 2018.

According to the Ministry of Commerce & Industry on Friday, the Index of Eight Core Industries (ECI) showed a rise of 6.6 percent from a growth of 7.6 percent in June.

However, on a year-on-year basis, July's growth was higher than the rise of 2.9 percent reported for the corresponding period of the previous fiscal.

"The combined Index of Eight Core Industries stands at 128.4 in July 2018, which was 6.6 percent higher as compared to the index of July 2017," the ministry said in a statement.

"Its cumulative growth during April to July 2018-19 was 5.8 percent."

The ECI index represents major sectors like coal, steel, cement, and electricity. It carries 40.27 percent weight of the Index of Industrial Production (IIP), which is the macro gauge for India's factory output.

On a sector-specific basis, refinery products, which has the highest weight of 28.03 percent, grew by 12.3 percent in July 2018 compared with the corresponding month of the last fiscal.

Electricity generation, which has the second highest weight of 19.85, picked up by 4.8 percent.

Steel production, the third most important component with the weight of 17.92, inched up by 6 percent during the month under review, whereas coal mining, with a 10.33 weight, edged higher by 9.7 percent.

On the other hand, extraction of crude oil, which has an 8.98 weight, declined by

(-) 5.4 percent during the month under consideration.

The sub-index for natural gas output, with a weight of 6.88, slipped by (-) 5.2 percent.

Cement production, which has a weight of 5.37, edged higher by 10.8 percent in July 2018.

Fertiliser manufacturing, which has the least weight -- only 2.63 -- inched-up by 1.3 percent during the month under review.

"The dip in the core sector growth in July 2018 relative to the previous month was modest albeit broad-based," said Aditi Nayar, the Principal economist at ICRA.

"The easing in growth of core sector output and automobile production, as well as an unfavorable base effect, suggest that a moderation in IIP growth in July 2018 relative to June 2018 is on the anvil."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)