India’s Economic Engine Stutters: Core Sector Growth Slows to 8-Month Low
India’s core sector growth, a key indicator of the country’s industrial health, has slowed to a nearly 8-month low of 0.5 percent in April, according to provisional government data released on May 20. This dip from 4.6 percent in the previous month raises concerns about the strength of India’s economic recovery.
The slowdown, attributed to factors like global economic uncertainty and a high base effect from the previous year, has impacted several key sectors. Six out of the eight core industries experienced a moderation in growth compared to March, with only coal and natural gas bucking the trend.
Paras Jasrai, Associate Director at India Ratings and Research, highlighted the role of ‘Tariff Tantrums’ – referring to trade disputes and protectionist measures – in fueling economic uncertainty, further impacting growth.
Cement and Electricity Show Signs of Slowdown
Cement, one of India’s primary infrastructure building blocks, grew at 6.7 percent in April, a significant drop from the 12.2 percent growth seen in March. Similarly, electricity growth slowed to 1 percent from 7.5 percent in the previous month.
Despite these contractions, coal production saw a positive upswing, increasing to 3.5 percent from 1.6 percent in March.
Impact on Industrial Production
Economists expect this slowdown in core sector growth to spill over into the broader Index of Industrial Production (IIP) for April. Aditi Nayar, Chief Economist at Icra, anticipates a sharp moderation in IIP growth to around 1 percent, compared to 3 percent in March.
The government is scheduled to release the official IIP figures on May 28.
Global Headwinds and India’s Growth Prospects
The slowdown comes amid ongoing geopolitical tensions and global economic uncertainties, which have prompted international agencies like the International Monetary Fund to revise India’s growth projections downwards.
The IMF now forecasts India’s economy to grow at 6.2 percent, down from the earlier estimate of 6.5 percent. The World Bank projects a growth rate of 6.3 percent for India.
The government will release data for the fourth quarter of the fiscal year (Q4FY25) on May 30, providing a clearer picture of India’s economic performance in the recent past.
