Day after poor IIP data, there’s bad core sector news

The government today said that the growth of six core infrastructure sectors, which contribute slightly more than a quarter to industrial output...

The government today said that the growth of six core infrastructure sectors, which contribute slightly more than a quarter to industrial output, fell sharply to 6.3 per cent in July from 10.9 per cent in the year-ago month. The cumulative performance during April-July, too, fell to 6.1 per cent from 8.7 per cent in the same period last fiscal.

This, as well as infrastructure growth figures released by the government, have created waves of apprehension across the economy. The slowdown in industrial growth, accompanied by disappointing infrastructure growth figures, might be an indication of a moderation in the country’s overall economic growth.

Further, data released on Wednesday revealed that industry growth during April-July 2007-08 is down to 9.6 per cent, from 11.1 per cent in the corresponding period last year. The worst hit, however, has been the consumer goods segment, with consumer durables and consumer non-durables recording a growth of -3.2 percent and 8.4 per cent respectively (with the overall growth in consumer goods being just 5.3 per cent).

“The poor performance of the consumer durable component of the IIP reflects that high interest rates are adversely affecting consumer spending,” said HDFC chief economist Abheek Baruah.

Meanwhile, the growth of six-core infrastructure sectors — cement, steel, coal, power, crude oil and petroleum refining — has also shown deceleration. CRISIL director and principal economist D K Joshi said, “Being a key factor, a continuous slowdown in infrastructure growth is likely to be a drag on industrial growth. However, while industrial growth has shown a slowdown, we do expect it to bounce back later this year,” he concluded.