Core growth shrinks to 1.4% in Jan

NEW DELHI: The growth rate of the six infrastructure industries ��� crude oil, refinery products, coal, power, cement and finished steel ��� slumped to 1.4%, reflecting a decline in consumption triggered by the economic slowdown.

The sectors grew at 3.6% in January last year. The drop in growth numbers in January is caused mainly by sharp falls in crude oil production and refinery output.

According to the provisional data released by the commerce and industry ministry on Friday, crude production and petroleum refinery output slipped into a negative growth in January, recording falls of 8.1% and 2.6% respectively.

���There���s a decline in consumption of petroleum products mainly due to the economic slowdown. The consumption of diesel has dipped due to fall in fuel demand from the power companies and also their recent switch-over to naphtha,��� said an Indian Oil Corp executive, who asked not to be named.

Coal production, power generation and finished steel also grew less, compared with growth in these sectors in the corresponding month last year.

The only exception is cement industry that managed to notch up an impressive 8.3% growth in January, on the back of a greater rural demand and increased government spending on infrastructure projects.

���With the financial year coming to a close, the government has increased its spending on road and infrastructure development projects. However, there is still a demand slowdown in urban areas thanks to real estate slump,��� Jaiprakash Associates COO (cement division) Rahul Kumar said.

In January, the growth rate in coal production and electricity generation was 6.3% and 1.4% respectively, while finished steel production grew at 1.2%. The steel sector showed a marked improvement in January over December���s performance when it had registered a negative growth of 0.8%.

The 5.1% growth recorded by core industries had brought cheer after a minor slump in August when it recorded a growth of 2.3%.

Output growth by the six core sectors during April 2008-January 2009 slowed to 3.2% from 5.7% in the corresponding period of the last fiscal.

Economists feel that growth in core sector will improve in the forthcoming quarter. ���The core sector data will show some improvement in the coming two months. Growth rate in sectors like cement has picked up on the back of the stimulus measures announced in infrastructure sector. We are expecting growth to stay moderate in coming quarters also,��� credit rating agency CARE chief economist Soumendra K Dash said.