Amid economic gloom, the core-sector has given signs of hope with the eight infrastructure industries growing 3.1% in July buoyed by an increase in production of steel, electricity and refinery products. The core sector grew 4.5% in July last year and only 0.1% in June this year.
The combined index of the core sector stood at 156.4 in the month and it grew on the back of a stellar performance by the steel sector whose output rose 7% in July, a 7-month high.
Analysts said the good performance in the steel sector may run into August as well. One of the biggest contributors to the steel output, state-run Steel Authority of India Limited (SAIL), for instance, registered a 16% growth in sales during the month of August this year.
?This mild pick up is due to an improvement in exports and this will reflect the IIP next month . (IIP growth in June stood at minus 2.2%. and April-June figure was minus 1.1%). However, this is only a partial pick up as natural gas and crude production are stagnating and there are problems in other sectors as well. There could be strong export growth in August due to which IIP will be good for the next two months,? said Mathew Joseph of Delhi-based Fore School of Management.
?The increase in month-on-month growth in steel production could be because of a diversion away from the imported to domestic steel given that construction and automobile production are not very active. A rise in coal and electricity production is odd because demand would generally be low in the monsoon season. These numbers indicate that input production is up and is likely that the IIP growth in July could be in the 0-1% range,? said Saugata Bhattacharya, chief economist, Axis Bank.
According to Sushim Banerjee, director general of Institute of Steel Development & Growth : ?This pickup in steel production is because traders have stopped booking imports die to the condition of the rupee. Also, new capacities have come up with SAIL and Tata Steel due to which they may be producing more than last year. ?