As per the data made available by the Ministry of Commerce and Industry, the growth in eight core sectors fell to 1.4% in February, in December (2.4%) and January (1.8%).
It seems that the efforts taken by Narendra Modi-led NDA government to revive India's manufacturing sector is still far from showing results. The growth in India's core sectors were recorded at 1.4% in February, or lowest in 16 months.
Clearly, government's efforts to boost domestic manufacturing hasn't find many takers yet and the Make In India campaign hasn't made sufficient inroads.
As per the data made available by the Ministry of Commerce and Industry, the eight core sectors (coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity) that comprise of 38% of the Index of Industrial Production (IIP), growth in these core sectors have been falling since December (2.4%), January (1.8%).
Industry experts are naturally disappointed with the numbers but see a silver lining in the recently concluded coal mine auctions. The growth in coal sector was recorded at 11.6% as against 1.7% in January 2015 and a mere 0.9% in February 2014.
Ratings agency ICRA said, ""The slide in core sector growth for the second month in a row...is disappointing. Lead indicators for IIP growth for February 2015 remain bleak."
The numbers are surely to reflect on Raghuram Rajan's mind as Reserve Bank of India (RBI) readies its monetary policy to be announced next week.
India Inc will once again take shield against these core sector growth numbers to ask for a rate cut.
However, RBI is unlikely to provide any relief to the banks in terms of repo rate cut.
RBI has already cut the rate twice out of turn this year and brought repo rate down from 8% to 7.5%. Banks, however, have failed to pass on the benefit to consumers citing poor liquidity and high deposit rates.
Also Read: Is RBI administering the wrong pill to bring down lending rates?
Moreover, credit growth in India continues to slow down. In the month of February, credit growth was recorded at 9.4% as against 14.7% in the corresponding month of last year.
Credit growth to India Inc has more than halved from last February.
Also Read: Credit growth slows to 9.4% in February
Madan Sabnavis, chief economist, CARE Ratings, in an emailed response to dna, said, "Problem today is no one is spending. Households are not spending due to high inflation. Corporate are not spending as they have excess capacity. Infrastructure is stuck for various reasons. Government is constrained by fiscal deficit," adding, "this to my mind is main issue. Interest rates do matter, but by just bringing them down we cannot expect a turnaround in investment."
Revival in investment takes time but the government should lead the charge by boosting investment like it said in the Union Budget.
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