Production growth in the six core infrastructure industries during March 2009 stood at 2.9 per cent, the highest since September 2008, indicating some amount of recovery in the Indian economy during the month under consideration. However, compared to the same month in 2008, the core sector registered a flat expansion.

The better than expected core sector numbers this March are likely to cushion the fall in Index of Industrial Production, as it constitutes 27 per cent of the index. IIP had contracted 1.2 per cent in February 2009, the most in about two decades.

“The IIP could see some low-positive growth in the month under consideration. But the pain in the economy is far from over,” said a Mumbai-based economist with a leading bank on condition of anonymity.

Compared to the previous months, core sector growth in March was better due to higher output of cement and electricity, which was supported by the coal and petroleum products sectors. However, crude and finished carbon steel output contracted, compared to the year-ago month, pulling down the overall growth rate of the core sector.
 

Economists maintain that monthly numbers are not sufficient to arrive at a conclusion on the health of the economy, but added that the next few months may see better times. “Recent numbers suggest that from here on, we may see some positive but tepid growth,” said Shubhada Rao, chief economist, YES Bank.
 

Significantly, steel output has increased 10 per cent from the previous month. In fact, in absolute terms, steel output in the month under consideration was the highest in 12 months and stood at 4,837,000 tonnes. This indicates that the contraction in output of this key construction input was due to statistical reasons rather than a muted demand.

Cement output growth was at a 13-month high, indicating demand from infrastructure projects, as most housing construction activity remains muted. However, it remains to be seen if the economy is able to absorb the 50 million tonnes of additional cement capacity scheduled to be added in 2009-10.

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