Core sector rebounds in Feb

Better industrial performance in sight.

Riding on higher output in cement, coal and electricity, the index of six core infrastructure industries grew 8.7 per cent in February 2008 against 7.6 per cent in the same month last year.

This is the second-highest growth in the index during 2007-08, next to the 9.2 per cent growth last August. 
 

RISING HOPES Index of six core infrastructure industries - February-2008
Sector	Weight  (%)  in IIP	Feb-08 % growth	Feb-07 % growth	Apr- Feb  07-08 % growth	Apr-Feb  06-07 % growth
Crude petroleum	4.17	2.30	4.90	0.40	5.80
Refinery products	2.00	5.80	11.30	7.20	12.80
Coal	3.22	11.70	6.50	5.60	5.30
Electricity	10.17	9.60	3.30	6.60	7.20
Cement	1.99	12.40	5.80	7.50	9.50
Finished steel (carbon)	5.13	8.20	13.60	5.00	11.30
Overall	26.70	8.70	7.60	5.60	8.70
Source: Commerce and industry ministry

On a sequential basis, the February growth is sharply higher than January's 3.1 per cent and a reversal of the declining trend of the past five months.

The data have raised expectations that industrial growth in February, data for which will be released on April 11, may be better than in previous months.

The Index of Industrial Production (IIP) had grown at a 10-month low of 5.3 per cent in January 2008, against 11.6 per cent in the same month last year. The index of six core infrastructure industries has a 26.68 per cent share in the IIP.

"The February core sector data should provide support to the mining and electricity components of the IIP in February. This will, in turn, serve as a cushion against the moderation in manufacturing growth," said Shubhada Rao, chief economist, Yes Bank.

Analysts project the IIP to grow annually at 8 per cent in February 2008 against 11 per cent in the same month last year. IIP growth has been slower in fiscal 2007-08 than the previous year mainly because of a moderation in manufacturing, especially consumer durables.

Experts say consumer durables consumption will pick up in coming months on account of the income tax rebates granted in this Budget and the higher disposable income on account of the Sixth Pay Commission award that is expected to come into effect from June this year.

Around 4.5 million central government employees are direct beneficiaries of an effective 28 per cent increase that the Commission has proposed.

On the whole, core sector growth in the eleven months (April to February) of 2007-08, for which data have been released, stood at 5.6 per cent, lower than 8.7 per cent in the same period of 2006-07. Of the 11 months in 2007-08, core sector growth rates were lower in as many as nine months over the comparable period in 2006-07.