Infrastructure output expanded at 5.2% in April, sharply lower than a year ago, strengthening fears that the high cost of capital is taking a toll on capital intensive industries. Infrastructure output had expanded at 7.5% in previous April. In 2010-11, the infrastructure sector grew at 5.8% as against 5.5% a year ago.

With a weight of about a fourth of overall industrial output, the slowdown in infrastructure sector could drag down the industrial growth figures for April, awaited later this month. Infrastructure, which contains crude oil, petroleum refinery products, coal, electricity, cement and finished steel, has the second-highest weight in the factory output after manufacturing.

Industrial output had rebounded in March to 7.3% after four months of lackluster performance but it failed to match the impressive 15.5% growth in the same month a year ago. The gross domestic product (GDP) figures for the fourth quarter of 2010-11 released on Tuesday too showed the economy growing at a slower pace of 7.8% as against 9.4% recorded in the same period a year ago.

?Steel production for 2010-11 bounced back from a modest level of 5.4 % in fiscal 2009-10 to above 8 % in 2010-11. Although production of finished steel has been subdued in April?11, it is expected that production will pick up as we move forward. Consumption of steel has been near double digit in 2010-11 which is likely to continue. Supply would accordingly respond in the coming months, in the wake of this strengthening of demand,? said SAIL chairman C S Verma.

Economists said infrastructure growth keeps fluctuating and April has been no different. ?The overarching issue is that the infrastructure sector has underperformed the economy in the last few months,? D K Joshi, chief economist of rating agency Crisil, told FE .

The growth was marred by cement production that fell 1.1% against the output in April last year. Finished steel also could not keep up with its performance in the past six months. Production of finished steel grew 4.3% against its six-month average of 9.5%. However, Joshi said that steel production will pick up soon. ?Outlook for cement is not as bad as reflected in the data,? Joshi said.

Crude oil proved to be the saving grace with production growth of 11%, compared to 5.1% in April 2010. In 2010-11, it grew 11.9% compared to 0.5% during the same period of 2009-10. The production of petroleum refinery products registered expansion of 6.6% in April against 5.3% a year ago. Last year, the growth was 3% against a fall of 0.4% in the previous year. Coal production grew 2.9% in April against a reduction of 2.9% in the corresponding period last year. In the previous fiscal, the growth was negative at 0.1% compared to an increase of 7.9% during the same period of 2009-10.

Electricity generation increased 6.8% during the month against 6.9% in April 2010. In 2010-11, the growth in power was 5.6% compared to 6.2% a year ago.

?If the government wants to improve the performance, it should prepare clear policies specially on coal that will also benefit the power scenario,? Joshi said.