Index of eight core industries, which captures production in basic industries, rose in June albeit at a slower pace compared with the six-month high it hit in the previous month.
Index rose 3 per cent in June over the year-ago period, lower than the 4.4 per cent growth recorded in May.
"Despite weak demand conditions, 3 per cent growth in core sector is encouraging," said Devendra Kumar Pant, chief economist, India Ratings. Pant expressed concern on the growth in the electricity generation sector which has only been able to muster 0.2 per cent growth compared with 15.7 per cent in June 2014.
The cumulative growth for the first quarter of fiscal eased to 2.4 per cent compared with 6.0 per cent in April-June 2014.
The eight core industries, which are a lead indicator for industrial production comprising nearly 38 per cent of the weight of items included in the Index of Industrial Production (IIP), started the year at a disappointing note, but data for May-June will provide some relief for the government. Though the index rose last month, it did not reflect the index of industrial production which dipped in May, presenting the discord between the data series.
All but two of the eight core sectors registered an increase. Of the eight sectors—coal, natural gas, petroleum refinery, fertilizers, steel, cement, electricity and crude oil—natural gas slumped by 5.9 per cent while crude oil, which accounts for 5.22 per cent weight in the core industries, fell by 0.7 per cent.
Electricity generation, which has the highest weight of 10.32 per cent, increased marginally by 0.2 per cent after increasing 5.5 per cent in May. Steel industry, which has the second highest weight, expanded by 4.9 per cent after a 2.6 per cent expansion last month.
For the first quarter of the year, coal was the top performing sector with a growth rate of 7.3 per cent lower than the last fiscal's growth of 8.3 per cent. Electricity, cement and steel on the other hand were the worst performing sectors in the first quarter.
Though the government has put in all the efforts to boost manufacturing through its "Make in India" initiative, the effect on industrial sector has rather been slow. With the RBI expected to meet on Tuesday, people are expecting another rate cut from the central bank to boost the ailing industrial economy. Although median forecasts from a poll conducted by VCCircle suggested that the bank might keep rates on hold for this meeting, it also highlighted possibility of another rate cut by the end of the year.
The government will release IIP figures for June on August 12, 2015.