Oil, power pull down core sector index

The index of production in the infrastructure sectors, that is, power, steel, cement, coal, oil and oil refinery products, grew at an abysmal 3.6 per cent in April 2008 as against a growth of 5.9 per cent in April last year. The index for the six infrastructure sectors, which are allotted a combined weight of 26.7 per cent in the index of industrial production IIP, stood at 232.3. This fall is in tandem with the performance of the IIP for the month of April, which grew by a meagre 7 per cent compared to a growth of 11.3 per cent in the same month last year.

The oil and oil products market has been fraught with uncertainties and speculation over the past few months of soaring prices of crude oil in the international market, something that is clearly reflected in the growth of crude oil production, which slipped from 1.4 per cent in April last year to 0.9 per cent this April. The overall growth for the fiscal ended March 31, 2008 was only 0.4 per cent compared to 5.6 per cent in 2006-07, a 93 per cent dip. Analysts say this was expected and will only get worse in the coming times. 8220;Domestic oil production in India is already poor and high prices will obviously further affect production,8221; D K Joshi, principal economist at CRISIL, told The Indian Express.

Surprisingly, the production of steel and cement, which have also witnessed a significant amount of volatility in their international prices over the past few months, have not done so badly. In fact, steel production rose by 4 per cent this April compared to just 2.7 per cent in the same month last year. Cement, on the other hand, grew by 6.9 per cent up from the 5.8 per cent growth rate last April. Analysts attribute this to good investment in infrastructure in the country. Power generation, which has the highest weight in the IIP among all sectors, has also suffered as the index for electricity grew by a modest 1.4 per cent this April compared with a growth of 8.7 per cent in April 2007.