Core sector growth runs out of gas@2.6% in FY14

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Core sector growth shr­ank to 2.6 per cent in the just-ended financial year thanks to a sharp contraction in natural gas, crude oil and fertiliser output. The growth figure for 2012-13 stood at 6.5 per cent.

The March number ca­me in at 2.5 per cent against seven per cent expansion in the same month a year ago. The slowdown in core sector performance will likely impact industrial output for the financial ye­ar. The eight core sector industries account for 38 per cent of industrial output.

Aditi Nayar, an economist with rating agency Icra, said: “Slack core sector growth in conjunction with a decline in merchandise exports points to a likely industrial contraction in March.”

March factory output data is due on May 12.

A sharp 13 per cent contraction in the year’s natural gas output, mainly due to a drop in production at the Reliance Industries-operated D6 fields in the Krishna-Godavari basin, proved to be the biggest drag on core sector growth. In March alone, natural gas output fell by 9.3 per cent on year. In 2012-13 too, a 14.5 per cent drop in gas output had dragged core sector performance down.

The growth in crude oil output declined by 0.2 per cent during the financial year and by 1.6 per cent in March. But steel, cement and electricity industries played saviour for the government, which has been fighting the ongoing general elections with its back to the wall mainly due to lacklustre economic performance.

Steel output grew 4.3 per cent in FY14 against 4.1 per cent in the previous year despite the economic slowdown and a demand squeeze through the year. Power was the only sector that outpaced the overall core sector performance in 2013-14.

The segment, which has 10.3 per cent weight in industrial output, put up a healthy show with 5.6 per cent expansion in the last financial year against 4 per cent growth in 2012-13.

The cement industry also reported positive growth with 3 per cent higher output, but it was much lower than the 7.7 per cent expansion achieved in the previous year.

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