The production of eight infrastructure industries rose 3.2% in August, compared with 3% in July, as steel output touched a 37-month high, showed the official data released on Friday. However, five of the eight industries, including crude oil and natural gas, recorded either a fall or slower growth in production compared with the previous month, indicating a sustained and broad-based recovery is still far away.
Coal output, too, dropped 9.2% in August, compared with a 5.1% expansion in the previous month, mirroring a fall in the production of state-run Coal India, mainly due to heavy downpour of rains during the month. Electricity generation rose a meagre 0.1% in August, the worst growth since November 2015.
“The deterioration in the performance of electricity generation was driven by the contraction in thermal electricity. To some extent, better rainfall as compared with 2015 has muted demand for electricity for irrigation and other end-use. The financial situation of some discoms also poses some constraint to off take of power,” said Aditi Nayar, senior economist at ICRA.
A surprise 17% rise in steel output, which started picking up since March after months of decline, helped drive up the overall index in August. The segment has witnessed growth in five of the past six month. This also suggests the government’s move to protect domestic primary steel producers against cheaper imports may have had an impact. However, the sustainability of growth at double-digit levels remains uncertain, given that the demand outlook has not undergone a sharp improvement, said Nayar.
Crude oil output dropped 3.9% in August, contracting each month since September last year (barring a 0.8% rise in February this year). Natural gas output shrank 5.7%, compared with a 3.3% rise in the previous month. It has still recorded contraction in eight of the past 12 months.
A crash in global prices of crude oil and natural gas have badly hurt domestic production of these commodities.
Cement output grew 3.1% in August, against 1.4% in the previous month. Fertiliser production growth inched up to 5.7% in August from a 4.3% drop in July, as rainfall improved, boosting prospects of kharif crop sowing.