Infrastructure sector growth slowed to 3.5% in August from a year earlier, sharply lower than the revised growth of 7.5% in July. During April-August, expansion of the sector, as measured by an index that covers eight specified industries, was 5.3% against 6.1% a year ago, according to the government data relased on Tuesday.
This further corroborates the trend of the slowing of the growth of the Indian economy, struggling to ward off the contagion of global economic crisis that seems only to deepen. The GDP growth this year is widely expected to be around 7.5%, significantly lower than the 8.2% estimated by the prime minister?s economic advisory council in its July review. The economy grew 7.7% in the April-June quarter.
The slowing growth in infrastructure also indicates a drop in industrial output, which is already on a slide. The core sector forms 37.9% of total production at the country?s factories. The government is likely to release figures for the industrial production in August on October 12.
In July, infrastructure had grown faster at 7.8% when compared to 5.2% in June. Despite the expansion of core industries, industrial output for that month had fallen to a 21-month low of 3.3% mainly due to continuous increase in interest rates by Reserve Bank of India. RBI has raised rates 12 times since March 2010.
Infrastructure is made of eight industries namely coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity.
?The slowdown is in the direction that most of us expected. Coal is a worrying area as new projects are not coming up at the desired pace. There is also an issue of environment clearance. Supply of LNG is also a cause for worry,? PwC executive director Manish Agarwal said.