Industrial growth may remain muted

Factory production may fail to look up even in July as eight core industries, having more than one-third of the weight in the Index of Industrial Production (IIP), slipped to a six-month low of 1.8 per cent in July. Natural gas, fertilisers and crude oil output continued with their declining spree. Their subdued growth in July this year may impact overall economic growth, as they have linkage to crucial manufacturing and electricity sectors.

The previous lowest expansion of 0.7 per cent was recorded in January 2012.

According to official data released on Friday, the core sector had recorded a growth of 8.2 per cent in the same month last year on the back of a healthy growth in steel cement and electricity. This time, however, none of the sectors recorded encouraging numbers, with steel, cement, refinery products, electricity and coal growing at 4.5 per cent, 3.8 per cent, 3.6 per cent, 2.2 per cent and 2.2 per cent, respectively.

 

“The data from the eight core infrastructure industries show the growth in steel production has been tapering down. While the cement sector has posted a double-digit growth, it is unlikely to grow at high levels in the near term,” said Arun Singh, senior economist, Dun & Bradstreet India.

On the brighter side, June core growth has been revised from 3.6 per cent, reported last month, to 3.9 per cent in the data released on Friday by the government. For April-July 2012-13, the growth slowed down to 3.2 per cent, compared with 6 per cent in the corresponding months of 2011-12.