Core sector growth slows to 5.3% in May

With a sharp decline in the production of natural gas and cement, the growth of key infrastructure industries slowed to 5.3 per cent in May. The output of these industries, crucial for overall economic growth, had expanded 7.4 per cent in the corresponding month a year ago, and 5.2 per cent in April this year.

The eight core infrastructure industries — coal, crude oil, natural gas, petroleum refinery products, fertilisers, finished steel, cement and electricity — account for 37.9 per cent in the overall index of industrial production. The growth rate in the April-May period was 4.9 per cent against 7.9 per cent in the corresponding period last year, according to data released by the Ministry of Commerce and Industry today.

The new data based on the new base year of 2004-05, puts the growth of the eight core industries at 144.5 points in April-May, which was 137.8 points in the same period last year.
 

GROWTH RATE OF CORE INDUSTRIES
Sector	Weight	2009-10	2010-11	April-May
				2010	2011
Overall index	37.903	6.6	5.7	7.9	4.9
Coal	4.379	8.1	-0.3	-1.3	1.9
Crude oil	5.216	0.5	11.9	5.5	10.3
Natural gas	1.708	44.6	10.0	43.5	-9.5
Refinery products	5.939	-0.4	3.0	6.5	5.6
Fertilisers	1.254	12.7	0.0	1.9	4.6
Steel	6.684	6.0	8.9	10.9	5.5
Cement	2.406	10.5	4.5	8.7	-1.7
Electricity	10.316	6.2	5.5	6.7	8.4
All figures in per cent                           Source: Ministry of Commerce and Industry

“The index has shown a slower growth but fall in growth rate has not been as sharp it was expected. The fall in growth rate of cement is bad as it reflects poorly on the investment scenario in the coming months,” said Siddharth Shankar of the Kassa Financial Group.

While coal, crude oil, fertilisers and electricity showed better growth compared to the previous year, steel and refinery products maintained positive growth, though slower than the previous year.

Natural gas and cement had a decline of 9.6 per cent and 2.3 per cent, respectively, in May. “The issue of falling growth rate of natural gas is a tricky one,” Shankar said. He added that the slow growth in the infrastructure sector, especially cement, reflected poorly on the investment scenario in the coming months.