Search the Internet          Tips  Sites: Finance, Investment

India's core sector growth slows, no revival seen

Growth in India's six key infrastructure sectors slowed to a paltry 1.2 per cent in July and analysts said a revival in demand was unlikely soon.

Figures released by the commerce and industry ministry on Wednesday showed infrastructure industries spanning the crude petroleum, steel, cement, refining, electricity and coal sectors grew an impressive 6.1 per cent in the same period last year.

"We are seeing continued deceleration. There is very little hope of a turnaround soon," Saumitra Chaudhuri, economic adviser and research coordinator at rating agency ICRA, told Reuters.

India, one of the world's fastest growing economies, has been in the grips of a slowdown following depressed consumer demand, a decline in infrastructure spending, increased import competition, political uncertainty, natural calamities and high oil prices.

The six infrastructure industries are crucial because they contribute 26.68 per cent to the index of industrial production and are an indicator of overall industrial growth.

The six sectors grew 1.0 per cent in April-July compared with an impressive 7.6 per cent in the year-ago period.

Industrial growth grew a mere 2.1 per cent in the first quarter of the current financial year.

"Overall if industrial output growth in the current fiscal reaches 4.4 per cent -- what we achieved in 1998-99 -- we should be lucky," Chaudhuri said. "The core sector figures show that there is a slowdown within a slowdown."

Petroleum refining was the hardest hit with growth slowing to 2.5 per cent in July compared with 34.9 per cent recorded a year earlier.

Growth in crude petroleum shrank 5.7 per cent compared with 1.0 per cent in the same month last year.

Cement too was down 6.1 per cent compared with 6.2 per cent growth a year earlier. Steel recorded 3.0 per cent compared with 8.3 per cent in the same month a year earlier.

The government is now counting on good monsoon rains to drive up consumption in the country where with 73 per cent of households are in the rural sector.

The south-west monsoon rains, which accounts for 80 per cent of the country's total rainfall, has been normal till now.

Good rains mean a revival in agricultural growth which has been on the decline for the past two years. Good farm growth could prop up the economy since agriculture contributes 30 per cent to the country's GDP.

Tell us what you think of this report