April is no longer the cruellest month. In the very first month of the current fiscal, six core industriestogether clocked the fastest growth rate in 10 months, emboldening the prime minister’s key economic advisor to hint at the possibility of an upward revision of the growth forecast for the year.
Power, crude oil, refinery products, coal, cement and finished steel grew 4.3% year-on-year, recovering from the low of 1.1% in December 2008, according to a release by the ministry of commerce and industry on Tuesday.
The April figures have raised hopes of a brighter industrial output, as these six industries have a combined weightage of 26.7% in the Index of Industrial Production (IIP).
“The growth in core sectors is on expected lines. Upside risk for economic growth projections made by EAC is emerging with a stable government coming to power, and the business confidence slowly returning,” said Suresh Tendulkar, chairman of the Economic Advisory Council (EAC) to the prime minister.
EAC had earlier projected a growth rate of 7% — plus or minus 0.5% — for 2009-10. April’s figures are the highest since last July, when the global financial meltdown pushed the Indian economy into rough waters. Consequently, the growth rate had dipped to 2.7% for the last fiscal against 5.9% for 2007-08.
Coal, followed by cement, clocked the highest growth, and the annual growth rate in steel production moved into positive territory after a month-long gap.
Economists that ET spoke to forecast that the revival in cement and steel production will pick up further post-April on the back of boosted public spending. Data on cement despatch for May from major manufacturers, including Ambuja Cement, Grasim Industries and its subsidiary UltraTech Cement, showed robust growth. However, the regular lull in construction activity during monsoon is likely to dampen this momentum thereafter.
Economists expect private investment activity to pick up further, with business confidence making a comeback.
However, they added that while signs of stability are becoming visible in terms of business confidence as well as modest improvement in investment growth, it will take some more time for the revival phase to set in, given the weakness in exports.
“Easing liquidity conditions and interest rates in the domestic as well as global financial markets should help Indian corporates in raising funds, thereby providing support to investment and industrial activity in the revival phase,” said Yashika Singh, head-economic analysis, Dun & Bradstreet India.
With electricity generation also picking up, crude and petroleum refinery products were the only segments that showed an annual drop in production in April. This is the fifth-straight month for which crude production is witnessing a year-on-year contraction while the output of petroleum refinery products showed the sharpest contraction in the past four months.
According to analysts, Indian oil wells are ageing, thus bringing down crude oil production. But with ONGC working on enhancing the productivity of these wells, we can expect production to move into positive territory, they said.
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