Core sector growth slows to 5.1% in April

The growth in six key infrastructure sectors decelerated to 5.1 per cent in April, as output in coal, electricity and cement slowed during the month.

The six core sectors, which constitute 26.7 per cent in the index of industrial production (IIP), had registered growth of 7.3 per cent in the previous month and 3.7 per cent in April 2009.

The deceleration in the growth rate of infrastructure sectors has been in line with experts’ estimate. Experts say the high growth rates registered in the previous months were unsustainable and will moderate further, given the statistical high base effect.

“It can be observed that the growth has not yet become stable in the past few months and data show high volatility every month. June onwards, IIP will normalise due to high base. One cannot still be confident about the sustainability of the growth rate,” said Bank of Baroda Chief Economist Rupa Rege-Nitsure.

Even as industrial production is expected to moderate in the coming months, analysts say the Reserve Bank of India (RBI) will tighten monetary policy in its fourth quarter monetary policy review on June 27.

“The RBI action will entirely depend on the inflation numbers. Between growth and inflation, the balance has tilted towards the latter. I expect an increase in policy rates in the monetary policy review,” added Nitsure.

The market expects an increase of 25 basis points in policy rates by RBI in the monetary policy review.

Crude oil and petrol refinery production grew at a rate of 5.2 per cent and 5.3 per cent during the month, against -3.1 per cent and -4.5 per cent, respectively, last year. Coal production registered a 2.3 per cent decline in April, compared to a growth of 14.2 per cent during the corresponding period last year.

The growth in cement production and electricity also decelerated to 8.7 per cent and 6 per cent on an annual basis during the month, against 11.9 per cent and 6.7 per cent, respectively, during the same period last year.

Finished carbon steel production grew at 4.7 per cent, compared to a decline of 1.3 per cent last year.