Eight core infra growth ease to 0.1%, raising concern of IIP growth

The growth of eight core infrastructure industries for the month of October 2011 declined to six year low-level of 0.1% compared to 7.2% in October 2010. This barely positive growth of core infra industries suggests that industrial growth will moderate in coming months as the eight infra industries which includes coal, crude oil, natural gas, refinery products and fertilizer, have combined weight of 38% in the Index of Industrial Production (IIP).

As per the data released by the Ministry of Commerce and Industry, the Index of eight core industries stood at 140.54 in October 2011 with a growth rate of 0.1% compared to its growth at 7.2% in October 2010.  During April-October 2011-12, the cumulative growth rate of the core industries was 4.3% as against their growth at 5.9% during the corresponding period in 2010-11.

For the month of October, sectors such as steel, electricity registered a positive growth, whereas cement registered a zero growth rate. According to the official data, Electricity generation had a 4.9% growth in October 2011 compared to its 8.5% growth in October 2010. Electricity generation grew by 8.6% during April-October 2011-12 as against its 4.8% growth during the same period of 2010-11. Steel production had a growth rate of 3.8% in October 2011 against its 13.4% growth in October 2010. Steel production grew by 8.7% during April-October 2011-12 compared to its growth at 8.3% during the same period of 2010-11. Cement production registered a growth of 0.0% in October 2011 against its 18.5% growth in October 2010. Cement Production grew by 2.8% during April-October 2011-12 compared to its growth at 6.6% during the same period of 2010-11.

However, sectors such as Coal, Crude Oil, Natural Gas, Petroleum Refinery Products and Fertilizers saw negative growth in October 2011. Coal production registered a growth of (-) 9.0% in October 2011 compared to its growth at 0.7% in October 2010. Coal production grew by (-) 5.5% during April-October 2011-12 compared to its growth at 0.3% during the same period of 2010-11.

Crude Oil production registered a growth of (-) 0.9 % in October 2011 compared to its growth at 13.7% in October 2010. Crude Oil production registered a growth of 4.4% during April-October 2011-12 compared to its growth at 10.7% during the same period of 2010-11. Natural Gas production registered a growth of (-) 7.4% in October 2011 compared to its growth at 6.5% in October 2010. Natural Gas production registered a growth of (-) 8.3% during April-October 2011-12 compared to its growth at 22.2% during the same period of 2010-11.

Petroleum refinery production had a growth of (-) 2.8% in October 2011 compared to its growth at (-) 4.8% in October 2010. Petroleum refinery production registered a growth of 3.6% during April-October 2011-12 compared to its 1.4% growth during the same period of 2010-11. Fertilizer production registered a growth of (-) 2.1% in October 2011 against its growth at (-) 0.2% in October 2010. Fertilizer production grew by 0.2% during April-October 2011-12 compared to its growth at (-) 2.0% during the same period of 2010-11.

The declining trend in the core infra industries indicated slowdown in investment activities because of the policy inertia, high interest rates, moderation in consumer demand and unfavorable global environment. Just 0.1% growth in core sector, has also raised concern over the IIP growth for October, as the IIP numbers for September 2011 has also declined to 1.9%.