Millennium Post

Infra sector growth slows to 3-month low of 2.4% in Dec

Negative growth in crude oil, natural gas, fertiliser and steel has led to the dip in the overall growth rate of core industries. The eight core sector industries -- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity -- had expanded by 4 per cent in December, 2013.
The growth was 6.7 per cent in November, 2014. The core sector contributes 38 per cent to the overall industrial production, a parameter that RBI takes into account while framing its monetary policy.

As per HSBC Purchasing Managers Index, manufacturing growth also slipped to a three-month low in January on slower pace of order flows from domestic and global markets, raising hopes of a rate cut by the RBI in its policy review. Bankers believe inflation is under control and macroeconomic indicators are also conducive for a further rate cut of 0.25 per cent, even as some expect the central bank to maintain a status quo.

“Notwithstanding the moderation in core sector growth in December and the fiscal cushion created through the stake sale in Coal India Ltd, we expect the RBI to pause in the February policy review and resume rate cuts only after the presentation of the Union Budget at the end of this month,” ICRA said in a statement. Production of crude oil declined by 1.4 per cent, natural gas by 3.5 per cent, fertiliser by 1.6 per cent and of steel by 2.4 per cent in the month under review. Coal production grew by 7.5 per cent, refinery products by 6.1 per cent and cement by 3.8 per cent. Growth in electricity generation declined to 3.7 per cent from 7.6 per cent. During April-December, the eight sectors grew by 4.4 per cent as against 4.1 per cent in the same period last year.

“We should look at the core sector data over a longer time period rather than monthly estimated data as it may not be representative.... Industry is already showing imminent signs of pick-up. With a continued policy push by the government in steel intensive areas like infrastructure, the domestic steel demand is expected to increase,” said SAIL Chairman C S Verma.  

The Reserve Bank of India (RBI, which last month announced a surprise rate cut of 25 basis points after maintaining a hawkish monetary stance for 20 months, is scheduled to undertake its sixth bi-monthly monetary policy review, 2014-15 on Tuesday.

Meanwhile, in the first meeting of NITI Aayog on Friday, Prime Minister Narendra Modi will interact with eminent economists and experts across sectors along with the existing members of the newly constituted body. “The meeting will deliberate over the role of NITI Aayog (National Institution for Transforming India) can play in changed economic scenario at its first meeting on February 6,” a source said.

The meeting is seen as crucial one as members of the Aayog would have first hand experience of Modi’s expectation from the new body and also help them in finalising the plan of action of the new body which was formed on January 1.

The Prime Minister is also expected to bring more clarity on whether the Aayog will be recognised as a government body or merely play the role of an economic think-tank.

The source said that the body is expected to be entrusted the task of evaluation government’s flagship programmes and monitoring of big infrastructure projects.
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