Annual core sector growth at decade low
According to latest government statistics, India’s annual core sector growth has slowed to a decade low of 2.7% in 2015-16, slower than the 4.5% pace in the previous financial year.
- The previous lowest growth rate registered by core sectors (under the present data series that uses 2004-05 as a base year) was in 2008-09 when output rose 2.8% amidst the global financial crisis.
- However, the eight core industries account for 38% of India’s industrial output.
Main factors behind the slowdown:
- The growth was pulled down mainly by steel and crude oil, both of which saw output contracting by 1.4% and natural gas that dropped 4.2%.
- While oil and gas output has been shrinking for about four years now, it is the decline in steel output in the backdrop of plunging global prices that has hurt the most as it had been growing at an average of 7% in the past four years.
Way ahead:
Steel is a mother industry and could be in a comatose position despite import price and anti-dumping curbs to restrict the influx of cheaper Chinese steel. Several plants can go under sooner rather than later so they need a lifeline.
- Steel has been hit by the low global prices and competition from China. The steel industry employs six million people directly and generates associated employment for more than 2.5 million.
- This should serve as a wake-up call for the government to move away from incremental reforms to relieve the distress in the steel sector and push construction and real estate sectors.
The eight core sector industries are— coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity.
