Core sector growth falls to 4.2% in Jan

Supply side bottlenecks compounded by a decrease in demand led to a near halving of core sector growth this January.

The index of six core infrastructure industries registered a growth of 4.2 per cent, compared with 8.3 per cent in January 2007.

For the 10-month period from April 2007 to January 2008, the six core infrastructure industries saw a growth of 5.5 per cent, as against 8.9 per cent during the corresponding period previous year.

However, on a sequential basis, the January growth numbers are better than the 2.7 per cent growth witnessed in December.

Data released by the commerce ministry here today showed that all six core sectors "" crude petroleum, refinery products, coal, electricity, cement and finished steel (carbon) "" recorded lower growth during January, as compared with the same month last year. 
 

THE FEEL-BAD FACTOR
Sector	Weight (%) in IIP*	Growth in %
		Jan-07	Jan-08	Apr-Jan 06-07	Apr- Jan  07-08
Crude petroleum	4.17	4.7	-0.2	5.9	0.3
Refinery products	2	11.2	5.3	13	7.3
Coal	3.22	9.9	4.8	5.2	4.8
Electricity	10.17	8.3	3.3	7.6	6.3
Cement	1.99	7.2	5.2	9.9	7
Finished steel  (carbon)	5.13	8.5	5.5	11.1	5.1
Overall	26.7	8.3	4.2	8.9	5.5
* Index of Industrial Production (IIP) Source: Ministry of Commerce and Industry

The data does not come as a major surprise to economists, coming as it does on the back of a dismal 5.3 per cent rise in the Index of Industrial Production (IIP). The index of six core infrastructure industries has a combined weight of 26.7 per cent of the IIP.

"The fall in infrastructure industries is sharper than the fall in industrial activity. This is a matter of concern. The lower growth rate in the index could be attributed to supply side bottlenecks. One can also see some slowdown in demand," said Dharmakirti Joshi, principal economist at credit rating agency Crisil.

Joshi expects the infrastructure index to rise by an annual 5 per cent in 2007-08.

One of the sharpest falls was seen in the electricity sector, which saw growth of only 3.3 per cent, as against 8.3 per cent same month last year. This is a significant dip, because the sector has the highest contribution amongst the six infrastructure sectors in the IIP.

The decline in crude oil production was due to lesser output from ONGC's Bombay High oilfiled, which produces bulk of the country's crude oil.