Cement, finished steel push core sector growth in March to 9.6%

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New Delhi, May 15 : A buoyant performance in cement and finished steel helped the six core infrastructure industries index to grow 9.6% in March 2008, slightly lower than the previous year’s 10.5%.

The overall industrial output (measures by the Index of Industrial Production—IIP), of which the infrastructure sector form 26.68%, had nose-dived to a six-year low of 3% in March from 14.8% in the previous year.

The increased production of cement and steel, coupled with an export ban on cement and shipment curbs on steel, is expected to have a cooling effect on inflation in the near future. The production of finished steel increased to 6.10 million tonne in March from 5 million tonne a year ago. Cement output also rose to 16.89 million tonne from 15.45 million tonne in March 2007. Cement and steel have a combined weightage of nearly 7% in the wholesale price index, with cement and cement products having a weightage of 2.16%, while that of iron and steel and related products is 4.73%.

During 2007-08 fiscal, the growth of the six core-infrastructure industries—crude oil, cement, electricity, coal, petroleum refinery products and finished steel—fell by almost half to 5.6% as against 9.2% during the corresponding period of the previous year.

In March 2008, the sectors among the six core industries that performed poorly include crude oil production (declined by 0.3%), petroleum refinery output (remained stagnant), electricity generation (whose growth fell to just 3.6% from 8%) and coal production (whose growth slipped to 9.3% from 10.6%).

However, finished steel production recorded a growth of 21.8% from 16.6% and cement output shot up to 9.3% from 5.5%.

Ishwar Hegde, chief economist, Essar Group, said, “Lower infrastructure growth reflects one of the reasons for moderation of industrial growth. This is not a good sign. Also, looking forward, we don’t see a huge uplift in the growth. Supply line is not coming as fast as demand and this is reflected in the inflation figures also.”

He said capital goods industries have a huge backlog of order and they are not in a position to meet the demand, adding that several greenfield projects, including steel and other core industrial projects, are facing delays due to some of these factors and the regulatory environment.

The 9.6% growth in six core industries in March was the highest throughout financial year 2007-08. Prior to this, these industries grew by 8.9% in August 2007.