Core sector growth slides to 6.3 per cent in Julynews
13 September 2007

Mumbai: A substantial slowdown in the production of coal, steel and petroleum products dragged overall growth in the six core sector industries to 6.3 per cent in July 2007 against 10.9 per cent in the same month last year.

This has compounded the problem of a slowdown in overall industrial production that signals a moderation in the country''s overall economic growth.

Core infrastructure industries of crude petroleum - petroleum refinery products, coal, electricity, cement and finished steel - registered a decline in growth during the month as higher interest rates curbed demand for manufactured goods like automobiles and consumer durables, besides housing and commercial real estate.

The performance of infrastructure sector mirrors the huge fall in industrial output - from 13.2 per cent in July 2006 to 7.1 per cent in July 2007.

"The index of industrial production (IIP) figures for July are disappointing," finance minister P Chidambaran said, but hoped demand will pick up once the festival season kicks off later this month.

Crude petroleum showed a negative growth of 0.9 per cent in July as against 4.10 per cent. Coal output dropped to 1.1 per cent from 9.1 per cent. Finished steel production growth almost halved to 7.9 per cent from 15 per cent. The six sectors carry a 26.7 per cent weightage on the IIP.

"Contraction in credit has achieved the purpose of controlling inflation but now we should ensure that growth is not impacted," commerce and industry minister Kamal Nath said.

He said the Reserve Bank should revise the monetary policy and ensure that credit contraction does not lead to decline in industrial growth.

The slowdown in core sector could have a direct bearing on economic growth, as well as indirect adverse effect on other sectors that use inputs from these industries.

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Core sector growth slides to 6.3 per cent in July