The Telegraph
Tuesday , July 1 , 2014
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Core growth slows in May

New Delhi, June 30: Core sector growth slowed to 2.3 per cent in May from 4.2 per cent in the previous month. The sector had expanded 5.9 per cent in the same month a year ago.

Aditi Nayar, senior economist with rating agency Icra, said, “The deterioration in the performance of steel and electricity over the previous month was largely responsible for core sector growth dipping to 2.3 per cent in May from 4.3 per cent in April.”

The segments that recorded negative growth in May were crude oil (-0.3 per cent), natural gas (-2.2 per cent), refinery products (-2.3 per cent) and steel (-2 per cent). According to data released by the ministry of commerce and industry, the output of coal went up 5.5 per cent and fertilisers rose 17.6 per cent. The production of cement expanded 8.7 per cent, while electricity rose 6.3 per cent.

During April-May, growth in the eight core industries slowed to 3.3 per cent against 4.9 per cent in the year-ago period.

Nayar said despite the moderation in core sector growth, a favourable base effect and year-on-year double-digit rise in exports in May would have boosted industrial output in that month.

“Also, the year-on-year rise in passenger vehicle production (4 per cent in May) after a gap of several months and a sustained growth of two-wheeler output will support manufacturing growth in May 2014 even though production of commercial vehicles continued to contract,” she added.

Fiscal deficit

The fiscal deficit in the first two months of 2014-15 was Rs 2.4 lakh crore or, 45.6 per cent of the budget estimates, for the whole financial year.

The deficit during the same period last year was 33.3 per cent of the budget estimates. For the whole fiscal, the deficit has been estimated at Rs 5.28 lakh crore.

The fiscal deficit was Rs 508,149 crore, or 4.5 per cent of GDP (gross domestic product), in 2013-14, down from 4.9 per cent in the previous year.

Nayar said the low growth of tax revenues in the first two months of this fiscal reflected sluggish economic activity in the pre-election period.

“Trends for the first few months of a fiscal year should be interpreted with caution as inflow from certain revenue streams is proportionately low in the initial months, including divestment and gross tax revenues, whereas several commitments are spread out fairly evenly throughout the fiscal year, including salaries, pensions, interest payments and devolvement of taxes to the states,” she said.

Data released by the Controller General of Accounts revealed that the total expenditure of the government during April and May was Rs 2.8 lakh crore, or 15.9 per cent of the estimates for the entire year. Of the total expenditure, plan spending was Rs 59,609 crore and non-plan Rs 220,730 crore.