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Infrastructure sector growth jumps to 6-month high of 6.6% in October
Writer Admin Date 2016-12-07 13:05

Core sector growth rose to a six-month high in October on the back of impressive performance by steel and refinery products, suggesting some pickup in industrial activity before the demonetisation shock.

 

The core sector index was up 6.6 per cent in October, according to data released by the government on Wednesday. The index was up 3.8 per cent in October 2015 and 5 per cent in September this year.

 

Eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — have a 38 per cent weight in the Index of Industrial Production. The core sector expanded 4.9 per cent in the April-October period, compared with 2.8 per cent a year earlier

 

As per data released by the commerce and industry ministry, steel production jumped 16.9 per cent in October. It had shrunk 5.5 per cent in the year-earlier period. "Domestic demand for steel may falter post-demonetisation, casting doubts on the persistence of the double-digit growth of steel production. However, buoyant international prices may support exports, providing a cushion to steel production," said Aditi Nayar, principal economist at ratings firm ICRA. The output of refinery products soared 15.1 per cent in October.

 

The sector had declined 4.4 per cent in October last year. Cement output rose 6.2 per cent, but demand may experience a temporary dip post-demonetisation, which would also affect the pace of core sector growth.

 

Growth in fertiliser and electricity generation was 0.8 per cent and 2.8 per cent, respectively, against 16.8 per cent and 13.8 per cent, in October 2015. Coal production fell 1.6 per cent as against growth of 6.6 per cent a year earlier.

 

"With reservoir storage significantly higher than year-ago levels, hydroelectricity generation is likely to continue to record healthy growth in the coming months, reducing the demand for thermal electricity," Nayar said. Natural gas and crude oil output both fell, by 1.4 per cent and 3.2 per cent, respectively.

 

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