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Infrastructure index figures doubtful, say experts

Mamata Singh  |  New Delhi 

The data on the index of released yesterday by the ministry of commerce and industry, have been questioned by experts.
The monthly indices, as reported by the ministry, are all in the range of 190 to 198. The average works out to 195.45, however, the index for April-July 2005, mentioned in the official press release issued yesterday, is 262.6, leading economists to question the reliability of the data.
"The indices just do not add up. There are aberrations in the April-July indices for 2003-04 and 2004-05 also. But, the gap in the April-July 2005-06 figures are quite glaring," said DK Joshi, Senior Economist, Crisil Marketwire.
Notwithstanding the figures for the first four months, the low growth in the crude petroleum and coal sectors, seen in July 2005 is expected to continue for some time.
However, the electricity sector's performance, which will be affected by the poor coal production, is expected to pick up next month onwards.
The growth in the index of infrastructure industries, had dipped to 0.5 per cent on account of a dip in production levels in these sectors in July 2005 as compared to 11.1 per cent July 2004.
Part of the reason for the low growth in July 2005, was the high base effect. The index of infrastructure industries, which accounts for almost 27 per cent of the index of industrial production, had reported growth of 11.1 per cent in July 2004, much higher than in June and August 2004.
The steel and cement sectors are, however, expected to continue doing well over the next few months.
The poor performance in crude oil, which reported a 4 per cent fall in production from 2,864 thousand tons in July 2004, to 2,750 thousand tons in July 2005, is expected to continue, at least till early next year.
"Crude production has been coming down for some time now. The fire at Bombay High, on July 27 exacerbated the situation," said Saumitra Chaudhuri, Economic Advisor, ICRA.
In fact, the full impact of the production loss will be seen in the figures for August, which will be lower than those for July. Till the facility if fully operational again (by early next year), the production figures will continue to be lower than in the previous fiscal.
The coal sector, which reported a 1.7 per cent dip in production from 28.6 million tons in July 2004 to 28.1 million tons in July 2005, could have impacted the power sector, which reported a 1.3 per cent fall in production from 50.3 billion units (BU) in July 2004 to 49.6 BU in July 2005.
"The coal sector performance has been bad, and will remain that way for some time," Chaudhuri said.
The progress in terms of opening up of captive mining has not been very fast. Most of the work is happening in Madhya Pradesh, Orissa and Maharashtra," Chaudhuri said.
Month on month growth, would however, vary because of the base effect. The coal sector had reported 0 per cent growth in August 2004, followed by 10.9 per cent growth in September 2004 and 11.8 per cent in November 2004.
The poor performance in coal production hit electricity production. Despite a significant 10 per cent increase in hydro electricity production from 8.7 BU in July 2004 to 9.6 BU in July 2005 and a 19 per cent increase in nuclear production from 1.2 BU to 1.5 BU in the same period, overall electricity production dipped by 1.3 per cent.
The cut was on account of a 5 per cent dip in thermal electricity production from 40.3 BU to 38.3 BU in July 2005. However, July 2004 electricity production was significantly higher than the trend production, leading to a dip in overall production figures.
"Since the production figures fell from July 2004 to December 2004, the corresponding period this year should see some increase in the growth rates till December," Chaudhuri said.
However, this segment has been hit by both coal and gas shortages, and with no clear solution to emerging as yet, the overall production is not expected to go up sharply despite the expected capacity expansion.

First Published: Thu, August 25 2005. 00:00 IST
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