Energy Drag Pulls India’s Core Sector Growth Down to 2% in July

India’s core sector growth slowed to 2% in July. This shows how uneven the country’s industrial recovery still is. The slowdown was mainly due to weak performance in the energy sector, where coal and natural gas production fell sharply.

On the brighter side, construction-driven sectors showed strong momentum. Steel output jumped nearly 13%, its best performance in almost two years, while cement grew over 11%, the highest in four months.

The numbers show a mixed picture. Energy output is weak because of the monsoon, but strong demand for steel and cement is helping the economy stay supported.

How Different Sectors Performed in July

India’s eight core industries make up 40% of the Index of Industrial Production (IIP). In July, their performance was uneven. Some sectors slowed down sharply, while others showed strong growth. Look at the numbers.

• Coal: Output fell by 12.3%, the steepest drop in 5 years.
• Crude Oil: Declined for the 7th month in a row, down 1.4%.
• Natural Gas: Slipped 3.2%.
• Petroleum Refining: Contracted after two months of growth.
• Steel: Surged 12.8%, the fastest rise in 21 months.
• Cement: Grew 11.7%, hitting its 4-month high.
• Electricity: Rose 0.5%, a small but positive move.

What This Means for the Economy

The July data highlights a clear divide in India’s industrial sector performance.

• Energy-linked sectors like coal, crude oil, natural gas, and refining are struggling due to monsoon disruptions and weak demand.
• Infrastructure-linked sectors such as steel and cement are showing robust growth. It is because of the ongoing construction activity and government infrastructure spending.
• Electricity managed to return to positive territory; however, growth remains modest.

Overall, the strong push from construction is helping offset the slump in energy. But the slowdown in core growth to 2% shows that industrial momentum is still fragile.

Investor Takeaway

For investors, the July core sector data highlights both opportunities and risks

• Cement and steel companies could see stronger earnings ahead. It is supported by the government’s push on housing and infrastructure.
• Energy sector stocks are under pressure. It makes them riskier bets until output stabilises.

Thus, a balanced investment approach is a safer option. 

Source: MoneyControl

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