Core sector index turns negative

New Delhi, March 22 | Updated: Mar 23 2005, 05:30am hrs
Fiscal 2004-05 is set to close on a negative note as far as infrastructure sector is concerned. For the first time in the current financial year, core sector growth turned negative with -0.6% in February against a robust growth of 12.2% in the corresponding month last year.

Poor infrastructure performance has become a cause of concern for the government. Planning Commission deputy chairman Montek Singh Ahluwalia, in an interview to FE recently underlined the need for increasing public investment in infrastructure. Finance minister P Chidambaram in his budget speech proposed to set up a special purpose vehicle (SPV) for garnering additional resources for funding infrastructure.

Mr Ahluwalia had earlier suggested that the government could dip into the huge forex reserves to finance infrastructure sector. Although the proposal is yet to take a concrete shape, international credit rating agency Standard and Poors has warned India and also Thailand not to succumb to such temptation. The agency has threatened to downgrade Indias rating in case it decides to use forex reserve for funding public infrastructure.

The six infrastructure industries, which include crude, petroleum refinery products, coal, electricity, cement and finished steel, recorded growth rate in negative territory in February 2005 after a gap of several years. The performance was positive all through during 2003-04. The fiscal ended with an overall growth rate of 6.8%. The April-February growth rate in the current year decelerated to 4.6% from 6.5% during the corresponding period last year.

What is more worrying is that out of six infrastructure sector industries as many as four sectors recorded growth which was in the negative during February. These include crude petroleum (-5.0%), petroleum refinery products (-3.5%), coal (-0.3) and cement (-0.9). The two sectors which recorded positive growth were cement (1.3%) and finished steel (1.7%).