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| Infrastructure growth slows to 5% in May |
| BS Reporter / New Delhi Jun 29, 2010, 01:08 IST |
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Growth in six key infrastructure sectors decelerated for a consecutive month, to 5 per cent, in May, as output in coal, cement and finished steel slowed.
The six core sectors, which constitute 26.7 per cent of the index of industrial production (IIP), had registered growth of 5.1 per cent in April, revised upwards to 5.4 per cent. The core sector had grown by 3.2 per cent in May 2009.
Despite the deceleration, analysts say the overall trend continues to be of robust growth, as most sectors show healthy growth rates.
“Growth has been good in crude oil and petroleum refinery products and, overall, the growth is good and the core sector will continue to support high overall industrial growth,” said YES Bank Chief Economist Shubhada Rao.
Moreover, car sales in the country rose by 30 per cent on an annual basis in May, while HSBC’s manufacturing Purchasing Manager’s Index (PMI) had grown at its fastest rate in over two years in May, keeping analysts optimistic about overall industrial growth prospects ahead.
IIP, which has been in double digits since October 2009, is expected to eventually moderate after 2-3 months due to a high statistical base effect. Given the high inflation scenario, analysts and the market have counted in a 25-basis-point increase in policy rates by the Reserve Bank of India (RBI) in the near future.
However, opinion is divided on the timing of such an increase in policy rates, with some expecting an inter-policy increase, while others see the raise coming through in the monetary policy review on July 27.
“We maintain there are chances of an inter-policy repo and reverse repo rate increase of 25 basis points, as we expect the liquidity situation to improve in the first week of July, but RBI will take a final call and may go for a rate increase on July 27,” Rao added.
| SLOW, BUT STEADY |
| * Growth in six key infrastructure sectors decelerated to 5 per cent in May |
| * It had grown at 5.1% in April and revised upwards to 5.4% |
| * Car sales rose by 30% on an annual basis in May |
| * IIP, which has been in double digits since October 2009, is expected to eventually moderate after 2-3 months due to a high statistical base effect |
| * Crude oil and petrol refinery production grew at 5.8% and 7.7%, respectively, against a decline of 4.3% each in the month last year |
| * Coal output saw a significant deceleration in growth, at 0.1 per cent, compared to a growth of 10.4 per cent last year |
| * Cement and finished steel production grew at a slower pace of 8.6% and 2.5%, against 11.8% and 2.8%, respectively, last year |
| * Electricity production grew at 6.4%, compared with 3 per cent in the corresponding month last year |
Other think tanks, like Crisil India, maintain a raise in policy rates only during the monetary policy review.
Crude oil and petrol refinery production grew at the rates of 5.8 per cent and 7.7 per cent, respectively, during the month, against a decline of 4.3 per cent each in the corresponding period last year. Coal output saw a significant deceleration in growth, at 0.1 per cent, during the month, compared to a growth of 10.4 per cent last year.
Cement and finished steel production also grew at a slower pace of 8.6 per cent and 2.5 per cent during the month, against 11.8 per cent and 2.8 per cent, respectively, in May 2009. Electricity production grew at 6.4 per cent, higher than a growth of 3 per cent clocked in the corresponding month last year. On a month-on-month basis, cement, finished steel and electricity production showed a deceleration in the growth rates, while growth in other sectors rose.
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