Eight Core Infrastructure Industries Growth slowed down to 2.3 per cent for September 2011

Data released by the commerce and industry ministry on 31 October 2011 showed that the eight core infrastructure industries growth slowed down to 2.3 per cent for September 2011 as against 3.3 per cent in September 2010. The slowdown was attributed to rising cost of credit and inputs and weak demand. The core sector spanning coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, registered growth slower than the 3.7% growth in August.

During the first half of the current fiscal (April-September 2011), key industries expanded by 4.9 per cent as against 5.6 per cent during the corresponding period in 2010-11 fiscal.

Growth in the country’s eight key infrastructure sectors slowed in September, dragged down by decline in coal, natural gas and fertiliser output, raising fresh concerns about the state of the industrial segment, which was hit by rising interest rates and input costs.

In September 2010, the core sector had grown 3.3%. In the first six months of 2011-12, cumulative growth rate of core industries stood at 4.9%, slower than the 5.6% registered in the same period in 2010-11.

The core sector growth was hit by rising cost of credit as the RBI has been making money expensive by raising key interest rates 13 times since March 2010 to contain inflation.

The eight infrastructure sectors account for 37.9% of overall industrial production. Economists are of the opinion that September data could have an impact on industrial output numbers, to be released on 10 November 2011.
Coal production fell 17.8% in September 2011 compared to a decline of 1.8% in September 2010. Rains in key coal mining areas and a strike in state-run Coal India is believed to have hurt output during the month.

Natural gas production declined by 6.4 per cent in September 2011 as against expansion of 12.6 per cent during 2010 period. Fertilisers were down 2.1 per cent. Production in both the steel and cement sectors also grew at a slower pace at 6.6 per cent and 0.9 per cent as against 11.7 per cent and 5.2 per cent in September 2010. Experts attributed the decline in coal production and natural gas to long term policy issues.

Electricity generation in September 2011 grew by 8.9 per cent generation while refinery products posted a growth of 4.4 per cent during the month. Production of crude oil (weight of 5.22 per cent in IIP) grew 0.1 per cent in September 2011 against a growth of 12.5 per cent in September 2010. Crude oil production grew 5.1 per cent during April-September 2011-12 against a growth of 10.2 per cent during the same period of 2010-11.

The index of eight core sector industries having a combined weight of 37.90 per cent in the index of industrial production (IIP) stood at 131.50 in September 2011, showing a growth rate of 2.3 per cent year-on-year.

Inflation measured on the consumer price index for industrial workers (CPI-IW) touched the doubledigit mark at 10.06% for September 2011.