Core sector growth slows to 6.3% in July

A substantial slowdown in coal, steel and petroleum refining production led to a decline in overall growth in the six core infrastructure sectors to 6.3% in July 2007, as against 10.9% in the same month last year. For the four month period till July this financial year, core sector growth rate declined to 6.1%, as against 8.7% in the same period in 2006-07.

Crude petroleum production registered a decline in growth at 0.9% in July, down from 4.1%, while petroleum refinery production dipped to 4.6% from 12.6% in July 2006. Coal production growth declined to 1.1%, a significant fall from the 9.1% growth witnessed in July last. Electricity generation registered a growth of 7.5% in the month under review, compared to 8.9% in July 2006. Cement production grew 9%, as against 14% same month last year, while finished (carbon) steel production grew 7.9% versus 15%.

The infrastructure sectors accounts for 26.7% of the Index of Industrial Production (IIP). The data came a day after IIP data showed that overall industrial growth slowed sharply this July, providing further evidence of a moderation in economic activity on account of a tight monetary policy and a perceptible slowdown in consumer spending.

The IIP rose 7.1% in July, as against 13.2% in July 2006. This has been the slowest growth in the index in the last nine months. It had slumped to 4.4% last October.

Recently, Finance Minister P. Chidambaram had written to Prime Minister Manmohan Singh apprising him of the slowdown in key infrastructure sectors and said that bottlenecks to production in these areas must be removed.

"Our assessment is that there has been a slow down in key infrastructure sectors. While there is no evidence of a slow down in investment, bottlenecks to enhanced production need to be addressed and removed."