Core sector output grows 3.9% in July

Industrial output rose by 7.1 per cent, the slowest pace in last 13 months.

The six infrastructure industries, which account for over a quarter of the country’s industrial production, grew by 3.9 per cent in July, mainly due to a decline in the output of cement and finished steel.

According to the latest data released by the government today, the six industries — crude oil, petroleum refinery products, coal, electricity, cement and finished steel — grew faster than the 3.2 per cent rise in July 2009, or the 3.6 per cent expansion seen in June this year.

While cement and steel production declined in July, crude oil output rose to the highest level in over a decade, led by private players such as Cairn India. Production was estimated at 3.2 million tonnes (mt), which is 15.8 per cent higher than the level of 2.79 mt produced in July 2009. According to Bloomberg data, the July output is the highest monthly production since at least January 2000.

Output in the refineries also went up by 13.7 per cent to 12.86 mt, against 11.40 mt a year ago. In July 2009, production of crude petroleum as well as refinery output had declined.

“Cement and steel demand is lower due to better rains this year, while the monsoon was weak last year. Going forward, this will get corrected as better rains will translate into higher demand, especially post-September,” said D K Joshi, chief economist at Crisil, a ratings agency.
 

UPWARD MARCH
Growth (in %)	Jul, '09	Jul, '10	Apr-Jul '09	Apr-Jul '10
Crude oil	-0.4	15.8	-1.0	8.4
Petroleum refining	-14.4	13.7	-6.9	7.3
Coal	10.5	4.5	12.4	0.9
Electricity	3.8	3.8	5.3	5.2
Cement	13.8	-0.2	12.5	5.2
Finished steel	4.0	-0.9	2.3	2.5
Overall	3.2	3.9	4.0	4.5

Besides, companies such as ACC said they had shut down some units as they were facing issues in shipping cement bags out of their production centres due to shortage of railway wagons.

Industrial output rose by 7.1 per cent in June from a year earlier, which was the slowest pace seen in 13 months. “Given that steel is a leading indicator, we may have to review the projections for the year, if the trend continues,” said Madan Sabnavis, economist at CARE Ratings.