A decline in cement output and lower growth in finished steel production slowed the growth of infrastructure industries to 5.2 per cent annually in April. Output of six core industries, crucial for overall economic growth, had expanded 7.5 per cent in the corresponding month a year ago, and 7.4 per cent in March this year.
Yesterday, data for gross domestic production (GDP) showed the country’s economic growth slowed to 7.8 per cent in the January-March quarter of 2010-11. However, it will be too early to expand the theory of slowdown on the basis of the core sector data for April, announced on Wednesday, only as the figures are too volatile and high interest rates that affected manufacturing sector do not have impact on these industries, say some economists.
Production of cement declined 1.1 per cent, as against 8.8 per cent growth in the same month of 2010. Cement output has been declining after three months of good growth since January. Growth in finished steel production slowed to 4.3 per cent, against 12.9 per cent expansion a year ago. The latest numbers mark the lowest growth in production of finished steel since July 2010.
Economists said a bigger concern was the coal output. Though coal production growth moved in a positive territory, it grew a marginal 2.9 per cent, compared to a 2.9 per cent contraction in output a year ago.
“There is a slowdown in investments and this has been reflected in the performance of the core industries. Besides, the latest GDP data has proved that the economy has entered a period of moderate growth and it is likely to remain so for five-six months,” said Samiran Chakraborty, head of research, Standard Chartered.
However, Crisil Chief Economist D K Joshi said core sector data was too volatile and it was very difficult to establish a case with one month data only for the entire financial year.
He said interest rates do not play such a dominant role in infrastructure sector, and it may be responsible for some squeeze in margins only. “Issues other than interest rates are affecting core sector growth. More than any segment, it is coal which is worrisome. Policy and procedural issues are affecting its growth rather than interest rates,” Joshi said.
