The output of eight core infrastructure sectors grew just 3.3% in August, the slowest pace in nine months and compared with 4.5% in the previous month, partly because the base effect turned unfavourable. They had grown 12.2% in August last year.
However, what worries analysts is the fact that, on a seasonally-adjusted basis, the core sector output in August witnessed a 0.9% contraction over July. The output has now shrunk sequentially for four consecutive months, according to India Ratings principal economist Sunil Kumar Sinha.
The slowdown will weigh on the index of industrial production given that these core sectors account for 40.3% of the index of industrial production.
Although six of the eight infrastructure sectors barring crude oil and natural gas) recorded growth in August from a year before, the support widely varied from sector to sector. For instance, steel grew just 2.2% (eight-month low), cement by 1.8% (seven-month low) and electricity by just 0.9% (seven-month low). Crude oil output, which has been easing since June, contracted 3.3% in August. Natural gas output shrank 0.3%. Of course, monsoon, and consequent slowdown in construction, had hit the production of some of these sectors.
However, petroleum & refinery products rose 7% in August from a year before. Fertiliser production grew 11.9% (mainly as the sowing of kharif crops was in full swing in states that received late rains) and coal output rose 7.6%.
India Ratings’ Sinha said the ongoing industrial recovery is still weak as the core sector output even now is only 3.5% higher than the February 2020 level (just before the Covid struck). “Even the ongoing momentum of industrial activity, which is captured by the seasonally-adjusted month-on-month growth, continues to be weak,” Sinha said.
Bank of Baroda chief economist Madan Sabnavis said the “disaggregated picture signals some slowdown in real terms”. He, however, added that mining has done well (7.6% growth), which came on top of 20.6% expansion in the same month last year.