Core sector grows 2.6% in Dec

Indicating sluggishness in the economy, the eight core sectors of the economy grew 2.6% in December compared with 4.9% growth in the year-ago period. The decline in growth in December, 2012, was on account of deceleration in the production of coal, natural gas and fertilisers.

The eight core industries of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity have a combined weight of 37.9% in the Index of Industrial Production (IIP). The combined index was 154.6 in December. These numbers would impact the industrial production data for the month which will be released next month. However, the numbers are a trifle better compared with November when the core sectors grew 1.8% and analysts see it as a good indicator of the IIP.

"The numbers show that the sequence of downturn is arrested and with the RBI having revised the interest rates, the IIP might improve. Crude oil and petroleum refinery production have increased and the turnaround is because of that. This can be seen as an indication of the worst being behind us," explained Biswajit Dhar, director general, Research and Information System for Developing Countries.

During April-December 2012-13, the cumulative growth rate of the core industries was 3.3 % compared to their growth at 4.8% during the corresponding period in 2011-12.

"Though IIP is not likely to grow very much, it is a good indicator for industrial production. However, the decline in coal production is worrying because of all the measures taken to boost its output. Also, the dip in cement output is peculiar as it was expected to rise," noted Saugata Bhattacharya, chief economist, Axis Bank.

Production of natural gas and coal contracted by 14.9% and 0.2%, respectively in the month while fertilizer output shrunk 3.8% against 0.8% growth in December 2011.

Steel and electricity production slowed to 5.2% and 4.4%, respectively against 10.2% and 8.9%, respectively, in the year-ago period. Similarly, cement output slowed to 3.9% from 13.6% in December 2011. However, crude oil and petroleum refinery output grew by 1% and 5% against the fall of 5.5% and 0.7%, respectively, in December 2011.

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