Six core sectors grow 3.9% in July

To impact industrial output


The six core industries — crude oil, petroleum refinery products, coal, electricity, cement and finished steel — had registered a 3.6 per cent growth in June this year. The growth rate was 3.2 per cent in July, 2009, data released by the Commerce and Industry Ministry on Friday said.

The growth of the core infrastructure industries has an impact on industrial growth, as they contribute over one- fourth to the Index of Industrial Production (IIP). The growth of these six industries in July is far less than the 5 per cent and 5.4 per cent growth rate achieved in May and April, respectively.

This translates into an average growth of 4.5 per cent during the first four months of this fiscal as against 4 per cent in April-July, 2009-10.

While crude oil and petroleum refinery output witnessed high growth in July, production of cement and finished steel dipped, the data showed. Crude oil production grew by 15.8 per cent in July, while refinery output expanded by 13.7 per cent.

However, cement production contracted by 0.2 per cent and finished steel output by 0.9 per cent year-on-year. Coal output slowed to 4.5 per cent against a robust growth of 10.5 per cent in July, 2009. Electricity generation grew by 3.8 per cent in July, 2010, the same rate as the corresponding month of the previous year.”This (core sector data) number would have an impact on the IIP of July... I think it would remain at 8-9 per cent,” Crisil Principal Economist D K Joshi said. Echoing Joshi’s views, Axis Bank economist Saugata Bhattacharya also said the sluggish growth of the core sector would moderate the IIP.

Cement production

Snapping an eight-month trend of double digit expansion, industrial growth slid to 7.1 per cent in June from 8.3 per cent a year ago. IIP data for July will be released in the second week of September. Bhattacharya said the contraction in cement and steel production is due to sluggish construction activities on account of the ongoing monsoon rains.

“Post monsoon, we can expect growth to pick up in both core as well as IIP,” he said. During the April-July period, crude oil, petroleum refinery products and cement production registered a growth of 8.4 per cent, 7.3 per cent and 5.2 per cent, respectively. Growth in crude oil and refinery products had contracted in the same period last year, though cement output was up 12.5 per cent.

Growth in coal output during the first four months of the fiscal slowed to 0.9 per cent from 12.4 per cent in the year-ago period. Similarly, growth in electricity generation slowed to 5.2 per cent from 5.3 per cent in April- July, 2009-10.

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