IIP expected to be in positive territory.
Growth in the index of six core infrastructure industries slipped to a three-month low of 2.8 per cent in May 2009 on account of a dip in crude oil and refinery production as well as less power generation by hydel plants.
The Index of Industrial Production (IIP) is most likely to be in the positive territory in May, even as the core sector performance was less than expected because of positive indications from some components of the manufacturing sector. The core sector has 27 per cent weight in IIP.
The core sector performance in May was lower than that of April, when it expanded by 5 per cent, as well as the increase of 3.1 per cent a year ago.
“IIP will be in the positive territory, but the growth will be muted. Indications from textile, auto and cement sectors are positive, which will keep IIP floating in the positive,” said Shubhada Rao, chief economist, World Bank.
Speaking to reporters here, Industry Secretary Ajay Shanker said: “In May, industrial output is expected to be better. Domestic demand-driven industries like cement, consumer goods and FMCG are doing well.”
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The core sector index was pulled down by a dip in crude oil and refinery production. Crude oil production last expanded in November 2008.
Refinery production in the month also dipped because of less demand in overseas markets as well as routine shutdown by domestic refiners. Petroleum ministry data showed that in April-May, output from BPCL and Essar refineries were down by more than 20 per cent, while Indian Oil Corporation and Reliance also produced less oil products.
Deficit in monsoon precipitation also played a role in the less than expected core sector production growth. Hydel power generation got impacted because of low reservoir levels — one of the lowest seen in May — which brought down the expansion in electricity generation to a three-month low. “Lower hydel power production could remain a challenge in the next few months,” Rao added.
| INDEX OF SIX CORE INDUSTRIES MAY 2009 Sector-wise growth rate (%) in production | |||||
| Sector | Weight in IIP (%) | May 2008 | May 2009 | Apr-May 2008-09 | Apr-May 2009-10 |
| Crude Oil | 4.2 | 3.2 | -4.3 | 2.1 | -3.7 |
| Petroleum Refinery Products | 2.00 | 0.1 | -4.3 | 2.1 | -4.4 |
| Coal | 3.2 | 8.8 | 10.2 | 9.5 | 11.8 |
| Electricity | 10.2 | 2.0 | 3.3 | 1.7 | 5.1 |
| Cement | 2.0 | 3.8 | 11.6 | 5.4 | 11.7 |
| Finished steel (carbon) | 5.1 | 3.3 | 1.4 | 1.4 | 2.1 |
| Overall | 26.7 | 3.1 | 2.8 | 2.7 | 3.9 |
| Source: Ministry of Commerce and Industry | |||||
The meteorological department has forecast that the India will receive only 93 per cent of the long-term average rainfall seen during the monsoon months of 2009.
However, robust production growth in cement and coal sectors cushioned the fall in core sector growth. Experts attribute the increase in coal production to additional demand from the power plants. Similarly, revival in demand from infrastructure projects have also led to increased cement production.
Finished (carbon) steel production growth continued to remain weak, possibly due to cheap imports as from countries like China.