November infra output dips 1.3% in 7-month-worst show

In its worst performance in seven months, output of the eight core sectors contracted by 1.3 per cent in November from a year ago period on account of a sharp drop in steel, cement and crude oil production. The eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — with a total weightage of nearly 38 per cent in IIP had grown at 8.5 per cent in November 2014. Last time, the sectors were in negative zone was in April, when they shrank by 0.4 per cent, while the rate of growth rate in October was 3.2 per cent. The cumulative growth rate in April-November came in at 2 per cent, much lower than 6 per cent in the first eight months of the last fiscal.

According to the data released by the Ministry of Commerce and Industry  on Thursday, crude oil, natural gas, steel and cement recorded negative growth during the month under review. Crude oil and natural gas production fell by 3.3 per cent and 3.9 per cent, respectively, from (-) 0.1 per cent and (-) 2.3 per cent a year ago. Growth in coal, refinery products and electricity generation output too slowed down to 3.5 per cent, 2.5 per cent and 0 per cent, respectively, from 14.6 per cent, 8.1 per cent and 9.9 per cent, respectively, in November last year.

However, fertiliser production grew by 13.5 per cent in November from (-) 2.8 per cent in the same month last year.  Commenting on the core sector figures, ICRA said weaker performance of key lead indicators such as the core sector, merchandise exports and automobile production in November as compared to the previous month portend a sharp dip in IIP growth. The IIP numbers for the month of November will be released during the second week of January. “The average contraction recorded by four of the core industries (crude oil, natural gas, refinery production and steel output) in the same months remains disappointing.

“In our view, the continuing sluggishness in exports and rural demand, the narrow recovery in infrastructure and the relatively brighter outlook for urban demand continue to point towards moderate industrial growth in H2FY16,” it said in a statement.

Meanwhile, the Commerce Ministry said free trade agreement (FTAs) have not contributed to the increase in trade deficits with “some countries”.

Though the preferential imports have been increasing from the period 2009-10 to 2014-15, they are still not significant, ranging from 5.9 per cent of total imports under the India-Malaysia comprehensive economic cooperation agreement (CECA) to 29.9 per cent of total imports under the India-Korea comprehensive economic partnership agreement (CEPA) during 2014-15. 

“This clearly indicates the preferential imports under FTAs have not contributed to the increase in trade deficits with some countries,” the commerce ministry said in its year-end review statement. 

The implications of the such agreements on India can be gauged from the regular impact analysis conducted by the Department of Commerce. One of the methods of gauging this impact of FTAs on overall trade is through preferential trade data.