Core industries’ growth in Sept slumps on rising interest, input cost

The sharp decline in key sectors of coal, natural gas and fertilizer have pulled down the index of eight core industries on the back of rising input costs and high interest rates. The index slowed down to 2.3% in September from 3.3% in September 2010. For the month of September, the Index of Eight core industries, which account for of 37.90% of the Index of Industrial Production (IIP) grew at its slowest pace in last 31-months.

As per the data released by the ministry of commerce and industry, the Index of Eight core industries stood at 131.50 in September 2011 with a growth rate of 2.3% compared to its growth at 3.3% in September 2010.  During April-September 2011-12, the cumulative growth rate of the core industries was 4.9% as against their growth at 5.6% during the corresponding period in 2010-11.

Electricity generation had 8.9% growth in September 2011 compared to its 2.1% growth in September 2010. Electricity generation grew by 9.3% during April-September 2011-12 as against its 4.1% growth during the same period of 2010-11. Steel production had a growth rate of 6.6% in September 2011 against its 11.7% growth in September 2010. Steel production grew by 9.5% during April-September 2011-12 compared to its growth at 7.4% during the same period of 2010-11. Further, Petroleum Refinery Products, which account for 5.94% of IIP grew by 4.4% in September 2011 compared to its growth at (-) 10.2% in September 2010.  Petroleum refinery production registered a growth of 4.7% during April-September 2011-12 compared to its 2.6% growth during the same period of 2010-11.

Cement production registered a growth of 0.9% in September 2011 against its 5.2% growth in September 2010. Cement production grew by 2.5% during April-September 2011-12 compared to its growth at 4.7% during the same period of 2010-11.  Crude oil production registered a growth of 0.1 % in September 2011 compared to its growth at 12.5% in September 2010. During April-September 2011-12, Crude oil production registered a growth of 5.1% compared to its growth at 10.2% during the same period of 2010-11.

However, sector like Coal production registered a growth of (-) 17.8% in September 2011 compared to its growth at (-) 1.8% in September 2010. Coal production grew by (-) 4.8% during April-September 2011-12 compared to its growth at 0.2% during the same period of 2010-11. Natural Gas production registered a growth of (-) 6.4% in September 2011 compared to its growth at 12.6% in September 2010. Natural Gas production registered a growth of (-) 8.5% during April-September 2011-12 compared to its growth at 25.2% during the same period of 2010-11. Fertilizer production registered a growth of (-) 2.1% in September 2011 against its growth at 0.3% in September 2010. During April-September 2011-12, fertilizer production grew by 0.6% compared to its growth at (-) 2.3% during the same period of 2010-11.

The record decline in core sectors is because of the poor performance of the mining sector, which is suffering from the unseasonal rains and policy uncertainty. This could be largely attributed to the strike at Singareni Collieries that hit production and the heavy rains that inundated coal fields in Eastern India. The decline in growth of core industries is expected to affect the growth of IIP for month of September. The industrial production had dropped to a 21-month low of 3.8% in July however; it recovered marginally to 4.04% in month of August.