Slowdown in core sector growth worries experts

Growth in the core sector, comprising six key infrastructure industries, decelerated to an low of 3.4 per cent in June, in the third straight month of deceleration.

The slowdown was primarily attributed to a high statistical base effect of last year. However, it also confirmed fears that the ebb in industrial growth over the past couple of months is real.

The core sector, with a 26.6 per cent weight in the Index of Industrial Production (IIP), stood at 6.3 per cent during the corresponding period in 2009. The infrastructure sector had posted a recovery in June last year and had registered a three percentage point increase from the previous month.

In May this year, the growth for the six key sectors was 5 per cent. During April-June, the core sector output rose at 4.6 per cent from 4.3 per cent in the year-ago period.

Analysts have termed the extent of deceleration as unexpected. However, they said moderation in the core sector and manufacturing index would continue. Most feel the overall industrial growth, in double digits for eight consecutive months since October 2009 and at 11.5 per cent in May, would have moderated to single digit level in June.

The moderation will be primarily guided by high statistical base effect of 2009, when the growth in core and manufacturing sectors had picked up sharply in June.