India’s eight core sector grew by only 3.5% in August compared to 4.4% growth during the same month last year. The eight core sectors are Electricity, Cement, Coal, Natural Gas, Crude Oil, Petroleum Products, Fertilizers and finished steel, which have more than 37% weight in the overall Index of Industrial Production (IIP). Electricity, Steel and Cement sector posted a strong growth of 8.9%, 7.7% and 7.2% respectively in August.
The core sector growth was dropped because of dismal performance by the Crude Oil, Natural Gas and Coal sectors. Crude oil sector grew by just 1.6% in August compared to 15.2% in the same month last year. Natural output and Coal output were contracted by 5.3% and 15.3% respectively in August which has dragged down the combined core sector growth lower.
High interest rate and borrowing rate is affecting the core sector growth and continue to do so. RBI has hiked rates 12 times since March 2010 to tame inflation which is derailing the industrial growth at the time of global slowdown. This dismal core sector growth is expected to pull down the IIP growth as well for the month of August.