Core infra sector grows 7.1% in January

NEW DELHI: India’s core infrastructure industries registered a robust growth in January, boosting outlook for overall industrial growth in the quarter ending March.

Output at the six key industries -- crude oil, electricity, petroleum refining, finished steel, cement and coal -- grew by 7.1% in January. This was faster than the downwardly revised growth of 6.1% in December, but slower than 9.8% registered in the corresponding period last year.

These industries have a combined weight of 26.7% in the index of industrial production ( IIP).

"The growth in the core industries is very encouraging and is a reflection of higher production activity in the industrial sector," said Madan Sabnavis, chief economist at CARE.

Cumulatively, the core sector grew by 5.6% between April 2010 and January 2011, a notch higher than 5.5% in the year-ago period. Crude oil production registered the highest growth at 10.8% as against 9.8% in January 2010.

Electricity generation expanded by 9.3% as compared with 6.4% a year ago, its best performance in 17 months.
Petroleum refining grew by 8.7% in January as against 3.8% in the year-ago month.

Two industries – finished steel and cement – registered a slowdown while coal recorded a contraction. Output of finished steel grew by 8.2% as compared with 16.8% in the comparable period. Economists, however, said the growth was encouraging as it reflected activity in the capital goods segment.

Cement output grew by just 1.8% in January as against 12.4% in the year-ago month.

"Cement producers have been increasing prices periodically and rationing output...we should see better performance in February and March," said Sujan Hajra, chief economist with Anand Rathi.

A contraction of 1.2% in coal production was a drag on the index. This industry had grown by 5.4% in January 2010.
Economists said contraction in this industry was hampering power generation.

"Coal production has been subdued for some time and there are a variety of factors responsible for it, such as heavy rains, bottlenecks and policy hurdles," said D K Joshi, chief economist with rating agency Crisil.