Core sector growth dips on crude oil, electricity output

Written by feBureau | New Delhi | Updated: Jan 31 2009, 06:04am hrs
Fall in the output of crude oil, electricity and finished steel have pulled down the growth of infrastructure sectoraccounting for over a quarter of Indias industrial outputto 2.3% in December 2008 from 3.2% a year earlier.

However, the overall growth rate of the six core industries crude oil, electricity, finished steel, petroleum and refinery products, coal and cementin December is marginally above a downwardly revised 1.8% in November, according to government data released on Friday. Core sector output growth for 2007-08 was 5.6% from the previous year.

The downward trend was reflected in the core sector growth for April-December period this fiscal, which was 3.5% as against 5.9% in the same period last financial year. The downward trend will be seen in the growth of overall industrial output as well, which is likely to be weak, analysts say. It will take some more time for firms to clear up all their inventories. Demand also continues to be weak so firms shall continue to cut production, said Sonal Varma, economist, Nomura Financial Advisory and Securities (India).

Steel sector is hit by fall in demand. Growth in finished (carbon) steel production fell to (-) 0.8% in December 2008 from 1.8% in December 2007. The growth of the sector fell to 2.7% during April-December period this fiscal compared to 6.4% during the same period in 2007-08.

Crude oil production registered a negative growth of (-) 0.3% in December 2008 compared with (-) 1.4% in December 2007. The growth in the sector slipped to (-) 0.5% during April-December 2008-09 compared with 0.3% in the corresponding period of 2007-08. Electricity generation growth also dipped to 0.7% in December 2008 compared with 3.9% in December 2007. The growth of the sector plunged to 2.6% during April-December 2008-09 compared with 6.6% during the same period in the previous fiscal.

The three sectors that showed an increased growth in December 2008 from the same month last fiscal were petroleum refinery, coal and cement. Petroleum refinery production, however, registered a growth of 3% in December 2008 compared with 1.9% in December 2007.