The Hindu Business Line : Infrastructure growth slips in July due to higher interest rates

New Delhi, Sept. 13 The growth of six core infrastructure sectors, which contribute 26.7 per cent in the Index of Industrial Production, fell sharply to 6.3 per cent in July 2007 from 10.9 per cent in July 2006.

According to the official data released here on Thursday, the cumulative growth performance during the April-July period also dipped to 6.1 per cent from 8.7 per cent in the same period last fiscal.

All the six sectors — cement, steel, coal, power, crude oil and petroleum refining — recorded a slower growth during the month which is mainly attributed to the higher interest rates which curbed the demand for manufactured goods, housing and commercial real estate.

Crude petroleum production registered a negative growth of 0.9 per cent in July this year (4.1 per cent). During the April-July period the production registered a growth of -0.3 per cent (1.2 per cent).

Coal show

Coal put up a dismal show with production growing a mere 1.1 per cent in July 2007 (9.1 per cent). The coal production grew only 0.6 per cent during April-July (8.3 per cent).

Finished steel’s growth was almost halved to 7.9 per cent in July this year from 15 per cent. For the four-month period this year the steel production grew by 5.3 per cent (13.3 per cent).

Electricity generation registered a growth of 7.5 per cent in July 2007 (8.9 per cent). The generation grew 8.1 per cent during April-July 2007-08 (6.2 per cent).

Petro projects

Petroleum refinery projects, on the other hand, registered a growth of 4.6 per cent in July 2007 (12.6 per cent). It registered an 11 per cent growth in the four-month period (12.1 per cent ).

Finally, cement production registered a 9 per cent growth (14 per cent) and the production grew 7.3 per cent during April-July period (11.1 per cent).

Demand-supply effects

Meanwhile, in its reaction the Associated Chambers of Commerce and Industry of India (Assocham) described the slowdown in coal, steel and petroleum refining output in July as a result of shrinkage in demand-supply due to India’s economic expansion and predicted a reversal.

Industry association FICCI, in a statement warned that the significant deceleration in the growth of six infrastructure sectors in July this year would act as a constraint on the overall growth of the economy.

“As such, infrastructure bottlenecks have been an impediment on the operations of the Indian industry. The further deceleration in the infrastructure sector will create fresh constraints. It will be imperative to kick start the growth process in electricity, steel and coal sectors for the economy to maintain a high trajectory,” FICCI said.