Infrastructure drills hole in India growth story

Thursday, March 20, 2008 | | |

The performance of six core industries has decelerated sharply during January 2008, raising more questions about the India growth story. With crude production declining and other sectors showing sluggishness, growth of the core infrastructure sectors nearly halved to 4.2% in January 2008 as compared to 8.3% during January 2007.

Coupled with rising inflation and a slowdown in the capital goods sector as well as slackening demand for consumer durables, the core sector deceleration is bad news for the economy. The stock market indices have slipped sharply in the past weeks due to growing concerns about a slowdown in the economy and an impending recession in the US, which has started affecting exports from employment-intensive segments.

According to data released by the government here on Wednesday, growth in the core sector (comprising crude oil, petroleum refining, power, cement, steel and coal) has led to a drastic fall in six core infrastructure industries to 5.5% during the first 10 months of the current fiscal as compared to 8.9% during April-January the previous fiscal.

Crude oil production registered negative growth of 0.2% in January compared with 4.7% in the same month a year ago. Growth in coal production declined to 4.8% in January 2008 as against 9.9% during the corresponding month of 2007.

The electricity sector witnessed growth of 3.3 % in January as against 8.3% during January 2007. The cement sector posted growth of 5.2% during the month, down from 7.2% in January 2007.