Poor infrastructure is still a speed-breaker for growth

So far, industrial growth has been healthy, despite infrastructure growth playing spoilsport. Hence, the news that the infrastructure index grew at a lower rate during June ’06, at 6.2% compared with 8.2% during the corresponding previous period will not worry Indian companies much.

Nor will the April-June ’06 growth that was lower at 6.3% compared to 7.5%. Industrial growth has been 10% in the year so far. Since the six core infrastructure sectors have a combined weightage of 26.7% in the IIP (Index of Industrial Production), growth would have been higher.

To that extent, infrastructure growth is still a drag. Electricity, which has a high weightage in the index, is the problem child, and a drag on the index. Two sectors that are at present strong contributors are cement and coal. Current trends indicate they will continue to do well.

Petroleum production is flat, but will start growing significantly from August on a low base (production last year was affected after an accident at Bombay High).

Lower electricity growth is not a big worry, as captive power plugs the gap. That explains why production growth has not suffered despite erratic power generation. What worries corporates more are the conditions of roads, ports, and airports. These don’t find a place in the index. Include them and the overall picture would look less rosy.