Rail freight rises: core sector in good shape

India’s goods traffic movement is a good lead indicator of how some core sectors are performing. Coal is shipped by rail. Steel plants transport ore and other raw materials to their plants, and transport finished steel back by rail. Other key commodities being transported by rail include fertilisers, foodgrains and crude oil. An increase in freight traffic either indicates higher demand for raw materials (coal is used by power and steel plants) or higher production because shipments are going up.

In October 2009, the freight earnings went up by 16.6% to Rs 4,802 crore. In September 2009, freight volumes had risen by about 6% and earnings had risen by 11% to Rs 4,444 crore. While the volume figures for October are not available yet, it appears that volume growth has picked up significantly over September.

The industries referred to here are basic industries, higher electricity generation points to an increase in general industrial activity. If more steel and cement is being consumed, it points to more construction activity. Using rail freight as an indicator, it would appear that the pick-up in industrial activity is being sustained. A clearer picture will emerge when the core sector growth figures are released later in the month.

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