New Delhi: Growth in infrastructure industries have fallen to 5.2 percent for the April quarter as high inflation may have impacted the core sectors.

The six core industries, with a weight of 26.68 per cent in the country's index for industrial production, had expanded by 7.5 percent in the corresponding month of the previous fiscal.

The data signals moderation in overall economic growth, as measured in the Gross Domestic Product. The GDP for the fourth quarter of fiscal 2010-11 had grown by 7.8 percent, the slowest pace in five quarters.

inflation, which hovers above 8 percent, is considered to be the main dampener.

A fall in cement output and lower growth in finished steel production led to the slowdown in the pace of expansion of the infrastructure sectors, which also include crude oil, petroleum refinery products, coal and electricity.

As per the provisional data released on Wednesday, production of cement declined by 1.1 percent in April this year, as against a growth of 8.8 per cent in the same month of 2010. Cement production has declined after three months of good growth since January this year.

Growth in finished steel production slowed down to 4.3 percent during the month under review, compared to 12.9 per cent expansion in April last year. The latest numbers mark the lowest growth in production of finished steel since July, 2010.

Experts said the slowdown was expected, as high interest rates hit the industry. As the inflationary pressure continues, the trend will not change for another five-six months, they said. Industrial production, as measured by the IIP, stood at 7.3 per cent in March, compared to 15.5 per cent expansion in the same month of 2010.

"There is a slowdown in investments and this has been reflected in the performance of the core industries. Besides, the latest GDP data has proved that the economy has entered a
period of moderate growth and it is likely to remain so for 5-6 months," Standard Chartered head of research Samiran Chakraborty said.

He, however, said the base also has a role to play in the low numbers.

"The growth was very strong in April, 2010, and this has also got reflected," Chakraborty said.

As per the latest data, electricity output grew by just 6.8 per cent in April this year, as against 6.9 per cent in the same month of 2010.

However, the other three sectors reported better growth during the month.

Crude oil production topped the table with growth of 11 per cent in April, compared to 5.1 per cent expansion in the corresponding year-ago period.

Petroleum refinery products registered a growth of 6.6 per cent in April, as against an increase of 5.3 percent in the same month last year. Output of these products had gone into a decline toward the last half of 2010, before recovering from December.

Coal output registered a growth of 2.9 per cent in April, 2011, a complete turnaround in comparison to the same month last year, when output had contracted by 2.9 per cent.

Coal production had been declining since January this year and the latest numbers show growth after three months of decline.

"It is going slower in pace, which is not a healthy trend... The interest rates are high, which are going to create some pressure on the growth rate. We are going to witness a moderate growth as inflationary pressures will be there," Crisil Chief Economist D K Joshi said.

Chakraborty also cited inflationary pressure and the resultant rate hikes as a matter of concern.

"The global commodity prices are quite high and the outlook remain uncertain. This will ensure that inflation remains in high numbers for at least the next six months," he said.

Headline inflation has been above 8 per cent since January, 2010, and stood at 8.66 per cent in April this year, much above the government's "comfort zone" of 4-5 per cent.

The Reserve Bank has already hiked its key policy rates nine times since March, 2010, to curb demand and tame inflation and experts have been saying that more rate hikes are on the cards, as inflationary pressure continues.

In its monetary policy for 2011-12, the RBI also said that high global commodity prices, particularly of crude, will put pressure on headline inflation in the near future. It said inflation would average 9 per cent during the first half of the fiscal, before moderating to around 6 per cent by March 2012.


(Agencies)