June core sector growth reaches 9-month high at 7.3%

In the clearest signal yet that economic activity is picking up after the recently-concluded general elections, India’s core sectors grew at 7.3 percent in June 2014, the Office of the Economic Advisor said today, compared to 1.2 percent growth in the year-ago month.

Activity in the eight core sectors — coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity – are considered as vital cog in economic growth and a higher growth number should reflect in heightened industrial activity and GDP growth numbers for the quarter, economists said.

The April-June quarter core sector growth stood at 4.6 percent versus 3.7 percent in the same quarter last year, data showed. The eight core sector industries carry a 37.9 percent weightage in the index of industrial production. SBI chief economic advisor Saumya Kanti Ghosh said he would increase his quarterly GDP growth forecast to 5.4-5.5 percent but cautioned that the higher number could also partially be attributed to the “low base effect”. GDP growth in the most recent quarter grew at 4.6 percent, capping two years of below 5 percent growth.

Yes Bank chief economist Shubhada Rao, however, said that it was too premature to expect the Reserve Bank of India to cut interest rates at its August 5 monetary policy meeting and added that she would watch for the trajectory for inflation to see if any policy easing could be expected ahead.