Core Sector Growth Slows in June

India's infrastructure sector growth slowed to a 19-month low in June, strengthening the case for an interest rate cut to support the economy as inflation fell to record lows.

Reduced output of cement, electricity and coal slowed the pace of expansion of the country's eight infrastructure sectors in June to 0.4%. The core sector had expanded 4.1% in May and 7% in June last year, indicating that high base of last year has also muted the growth.

The eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity constitute 40.27% of the total industrial production. Muted core sector could further dent industrial growth that was placed at 1.7% in May.

Cement production declined 5.8% in June from 0.4% fall in May. Coal output nosedived 6.7% from a 3.2% decline in May. Refinery production declined 0.2%. Crude oil output rose a meagre 0.6% in June and electricity production was up 0.7%. Only natural gas and steel showed a sharp rise in production in June at 6.4% and 5.8%, respectively.

An unfavourable base effect and inventory trimming prior to onset of GST may contribute to a contraction in industrial output in June 2017, in stark contrast to the 8.9% expansion in June 2016.

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