Core sector grows 7.2 % in March

Brightens prospects for factory output.

Six major infrastructure industries, which constitute the core sector, registered robust growth of 7.2 per cent in March — the highest in 2009-10.

The growth was primarily on account of increase in steel, cement and electricity production. The cumulative growth for the entire financial year stood at 5.5 per cent, significantly higher than the 3 per cent last year.

The core sector, which has a 26.68 per cent weight in the Index of Industrial Production (IIP), had grown at 4.7 per cent in the previous month and 3.3 per cent in the corresponding month of 2009. The infrastructure in March has fuelled the expectation of a sustained high growth in overall industrial output, which has been in double digits since October. The average growth in industrial output, as measured by IIP, for the first eleven months of 2009-10 stands at 10 per cent. Analysts expect the March figures to sustain the high growth rate.

“The core sector data are quite encouraging, especially the performance of the sectors of steel, power and cement. This will keep the overall IIP strong and, given the bump up in industrial production in March, the IIP growth will be impressive,” said YES Bank Chief Economist Shubhada Rao.

Analysts, however, say the Reserve Bank of India (RBI) will watch the growth figures and the effect of monsoon on the domestic demand to further spruce up policy rates. Most maintain the next measure for monetary tightening will take place in the July monetary policy review.

“I do not expect any increase in rates before July. I do not think RBI will monitor month-on-month data that much, but it will look at the impact of monsoons on domestic demand and growth,” Rao added.

Electricity generation, coal and cement production grew at 7.8 per cent each during March, against 6.3 per cent, 5.3 per cent and 10.1 per cent, respectively, during the corresponding month in 2009.

Finished steel production soared during the month, growing at 9.2 per cent, compared to a decline of 1.8 per cent in March 2009. Crude oil and petroleum refinery output grew at 3.5 per cent and -0.4 per cent during the month, compared to -2.3 per cent and 3.3 per cent, respectively, during the corresponding period last year.

On a cumulative basis, for the April 2009 to March 2010 period, cement production grew at the highest average annual rate of 10.5 per cent, while growth in petroleum refinery products output was the least, at -0.4 per cent.