Alarm Bells For Indian Economy As Eight Core Sectors Register Negative Growth Rate In August
Eight core sectors of the Indian economy have recorded a 0.5 per cent decline as of August 2019 according to the data released by the government on Monday. The core sectors, namely coal, crude oil, natural gas, refinery products, fertiliser, steel, cement, and electricity, had grown by 4.7 per cent in August last year.
This data release comes at a time when there are questions regarding an economic slide in the country, which the government is defiant to accept. The country’s GDP has fallen to a six-year low at 5 per cent in the first quarter of the current fiscal. Adding to that, growth rates of the eight core industries are further solidifying the economic stance of the nation.
Coal, crude oil, natural gas, cement, and electricity recorded negative growth of 8.6 per cent, 5.4 per cent, 3.9 per cent, 4.9 per cent and 2.9 per cent, respectively, according to the data of the Commerce and Industry Ministry.
However, fertiliser and steel production grew by 2.9 per cent and 5 per cent, respectively during the month under review. During April-August, growth in the eight core industries grew by 2.4 per cent from 5.7 per cent in the year-ago period.
“The performance of the core sectors in August 2019 was disappointingly weak, with a broad-based deterioration in six of the eight constituents and as many as five sectors recording a year-on-year contraction in that month,” said the rating from Icra Ltd.
Aditi Naya, the chief economist at the firm, said, the IIP growth which had seen a slight rise in July does not indicate an industrial recovery due to contraction that has happened in the subsequent months.
“The Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP). The combined Index of Eight Core Industries stood at 131.9 in July 2019, which was 2.1 per cent higher as compared to the index of July 2018,” the Commerce Ministry said in a statement on Monday, reported Business Today.
It is believed that this may prompt the monetary policy committee (MPC) of the Reserve Bank of India to cut interest rates for the fifth consecutive time at its meeting later this week.
Indian businesses are in a downward spiral due to slowdown in demand and liquidity crunch, resulting in economic growth rate cooling to a six-year low of 5 per cent in the June quarter, while private consumption expenditure dropped to an 18-quarter low of 3.1 per cent. The government’s decision to cut the corporate tax rate is supposed to boost sentiment; most analysts believe that a significant turnaround in either investment or consumption in the short run is highly impossible.
According to the central bank, which released its own data metrics separately showed non-food credit growth, a key indicator of consumer demand — decelerated to 9.8 per cent in August from 12.4 per cent a year ago.