Indian Core Industrial Sectors Grow 5.2% in April 2011

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Researched by Industrial Info India (Delhi, India)--In the first quarter of 2011 India's economy grew its slowest annual rate in five quarters. India's core industrial sectors grew 5.2% in April 2011, compared to 7.4% in March 2011 and 7.5% in April 2010. The core industrial sectors include crude oil, refined petroleum products, coal, electricity, cement and finished steel. The index of six core industries, which have a combined weight of 26.7% in the Index of Industrial Production (IIP), which is based on 1993-94 figures, stood at 276.5 in April this year.

This signals a moderation in the economic growth rate for the country. The slowdown in core industries, which have a weight of 26.68% in the country's index for industrial production, is expected to affect the overall factory output for the month. The main factor responsible for this moderation is the tightening of monetary policy by the government of India. This has led to increasing interest rates, making all kinds of borrowing expensive.

Coal (3.2% in IPP) grew 2.9% in April 2011, matching the April 2010 growth. Coal production showed an overall decline of0.1% rate for April 2010 to March 2011 compared to an increase of 7.9% in the corresponding period of 2009-10.

Finished steel production showed a growth of 4.3%, compared to 12.9% in April 2010. Electricity output declined to 6.8% growth in April this year, compared to 6.9% in the same month of 2010. Cement output contracted 1.1% in April, compared to growth of 6.5% in March this year.

However, there are some sectors that have shown a positive trend. Crude oil production, which has a weight of 4.17% in the IIP, grew by 11% in April 2011, compared to 5.1% in the same month last year. Crude oil production rose 11.9% in 2011-11, compared to 0.5% in the same period of the previous fiscal year. Similarly, coal output posted a growth rate of 2.9% in April in, compared to a 2.9% decline in the same month last year.

Inflation in India will continue to pose a challenge for at least another couple of quarters, as rising commodity and oil prices impact the economy. The country's central bank has raised interest rates to tackle the threat of inflation, but now may ease off interest rate rises.

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