Core Sector Growth Slows to 1.4%

Growth in India's core sector slumped to a 16-month low in February even as the government made efforts to boost domestic production and unclog supply-side bottlenecks.Exceptional growth in coal output and moderate performance of electricity prevented the index from contracting.
The output of eight core industries grew 1.4% in February, the lowest level since October 2013, compared with 1.8% in the previous month.
The core index captures output in eight infrastructure industries -coal, electricity, crude oil, natural gas, steel, cement, fertilisers and refinery products. It has a 38% weight in the Index of Industrial Production (IIP). The IIP rose 2.6% in January against an upwardly revised 3.2% in the previous month.
Output contracted in five industries ­ crude oil, natural gas, refinery products, fertilisers and steel. Coal output grew at a three month high of 11.2% versus 1.7% in January and is expected to improve over the next financial year. The government has auctioned 42 coal blocks cancelled by the Supreme Court last year, garnering revenue of close to Rs.2 lakh crore. This, in turn, will boost power generation in the country . The government will allocate the remaining 163 cancelled coal blocks within the course of the next financial year.
Electricity and cement grew by 5.2% and 2.7%, respectively, in February. The core sector growth in the 11 months to February stood at 3.8% compared with 4.2% in the corresponding period last year.
Finance minister Arun Jaitley announced a series of measures to boost domestic manufacturing in the Union budget, including duty anomaly corrections and improved credit access for small and medium enterprises.Taking comfort from low inflation levels, central bank governor Raghuram Rajan went for an out-of-cycle policy cut earlier this month, lowering the repo rate by 25 basis points to 7.5%, expected to result in an investment pick up in the country.
According to official estimates, the manufacturing sector is estimated to post a 6.8% growth in 2014-15, compared with 5.3% in the previous financial year.