Core Infra industries growth slows to 5.3% in May

The core infrastructure industries registered a slowdown in the pace of growth in the month of May, coming down at 5.3% compared to 7.4% registered in May 2010, mainly due to increased interest rates and confusion on policies. The RBI has raised interest rates 10 times since March 2010 to tame inflationary pressures and has made its intention clear to sacrifice some growth to calm inflation, so the sluggishness in the industrial sector comes as an obvious outcome. According to data released by ministry of commerce and industries, in the first two months of the fiscal (April-May) 2011-12, eight core industries registered a growth of 4.9% as against 7.9% during the corresponding period of the previous year 2010-11.

The eight core infrastructure include, crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel, and have weight of 37.90 % in the Index of Industrial Production. The fertilizers and natural gas are two new industries added to the core infra industries. In month of May, crude oil, electricity, fertilizers, coal, Refinery products and steel registered positive growth on the other hand, cement and Natural gas show negative growth. Electricity generation which has weight of 10.32% in the IIP registered a growth of 10.3% in May 2011 compared to a growth of 6.4% in May 2010. Electricity generation grew by 8.4% during April-May 2011-12 compared to 6.7% during the same period of 2010-11. Crude Oil production which has weight of 5.22% in the IIP registered a growth of 9.7 % in May 2011 compared to a growth of 5.8% in same month last year. For April-May 2011-12 the growth in the segment was 10.3% compared to 5.5% during the same period of 2010-11.

Fertilizer production which has weight of 1.25% in the IIP registered a growth of  7.3% in May 2011 compared to (-) 6.7% in May 2010, while the production grew by 4.6% during April-May 2011-12 compared to an increase of 1.9% during the same period of 2010-11. Steel production which has weight of 6.68% in the IIP registered a growth of 6.1% in May 2011 compared to 9.0% in May 2010 and grew by 5.5% during April-May 2011-12 compared to an increase of 10.9% during the same period of 2010-11. Petroleum refinery production which has weight of 5.94% in the IIP registered a growth of 4.5% compared to growth of 7.7% in May 2010. For April- May growth of the segment was recorded at 5.6% compared to (-) 6.5% during the same period of 2010-11. Coal production with the weight of 4.38% in the IIP registered a growth of 1.1% in May 2011 compared to growth of 0.3% in May 2010. Coal production grew by 1.9% during April-May 2011-12 compared to an increase of (-) 1.3% during the same period of 2010-11. 

However, Natural Gas production with the weight of 1.71% in the IIP registered de-growth of (-) 9.6% in May 2011 compared to growth of 34.4% in May 2010. For the first two months of the fiscal it registered a growth of (-) 9.5% compared to 43.5% during the same period of 2010-11. Cement production having weight of 2.41% in the IIP too registered de-growth of (-) 2.3% in May 2011 compared to a growth of 8.6% in May 2010. Cement Production grew by (-) 1.7% during April-May 2011-12 compared to an increase of 8.7% during the same period of 2010-11.

The core infra sector is growing at the slow pace however, six industries have shown positive growth year-on-year under observation and for the first two months of the fiscal. This indicates that the core sectors contribution to IIP is not waning, in April the core sector grew by 4.6% and IIP for April was 6.3%.