Up 2.8%,core firmly on recovery path

Up 2.8%,core firmly on recovery path
The Economic Times, July 1, 2009, Page 11

May Trend Portends Renewed Vigour In Industrial Growth, Say Economists

Our Bureau NEW DELHI

THE output in the six infrastructure industries grew 2.8% in May, pointing to a recovery in economic activity. While there is high divergence in the core sector data, the underlying trend is one of renewal in industrial growth, say economists.

“There is too much noise in the system and, hence, we cannot say whether this is a sustained recovery. But the underlying trend that is emerging from the data suggests recovery,” said DK Joshi of Crisil. The industries — oil, petroleum refinery products, coal, electricity, cement and finished steel — grew 3.1% in May 2008.

Cement output, which is an indicator of the construction activity in the country, clocked its second-highest growth in 12 months at 11.6%. “The growth in cement is encouraging; it has a multiplier effect and is a driver of growth,” said Ajay Shankar, secretary in the department of industrial policy and promotion (Dipp).

The core industries have a weight of around 27% in the index of industrial production, which is expected to show a high growth. “Industrial output for May is expected to be better… robust performance by domestic demand-driven industries will reflect in industrial output,” added Mr Shankar.

Oil and petroleum refinery products are the two sectors that have showed a drop in growth last month at –4.3% each.

“While the stimulus packages seem to have come in full effect as is seen through a robust growth in raw materials like cement and steel, revival in oil and petroleum holds the key,” said Soumendra K Dash, chief economist of CARE.