Growth in the output of eight core infrastructure sectors decelerated sharply for a second straight month to hit a six-month low of 4.5% in July from a year before, as a conducive base effect waned considerably. The growth was as much as 13.2% in June and 19.3%, a 13-month peak, in May.
It may weigh down the growth of the index of industrial production (IIP) in July from 6.7% in June, given that the core industries make up for 40.3% of the IIP.
All the eight sectors witnessed a month-on-month slowdown in growth, showed the data released by the industry ministry on Wednesday. Sequentially, the output of the eight infrastructure sectors witnessed a 2.3% drop in July.
However, on a year-on-year basis, only two sectors– crude oil and natural gas—witnessed a slowdown. While crude oil output contracted 3.8% in July, against a 1.7% drop in the previous month, natural gas production shrank, albeit mildly (0.3%), after a gap of 16 months.
As the base normalises, growth in the core infrastructure sector will likely remain under pressure in August, before somewhat recovering in September, as the base turns favourable again, some analysts said. Of course, the core index still grew at a reasonably decent rate of 6.1% in July from the pre-pandemic level (same month of 2019).
The data showed the rise in coal production in July slowed to 11.4% from 32.1% in the previous month. Fertiliser output grew 6.2% against 8.2% in the previous month. Similarly, cement output growth sharply decelerated to just 2.1% in July from 16.5% in the previous month. Steel output grew 5.7% from 9.4% and electricity generation growth slowed to 2.2% from 16.5%.
Economist at India Rating said, the ongoing recovery has still a long way to go. On a seasonally-adjusted month-on-month basis, the core sector output in July showed a contraction of 1.2% over the previous month, they said. The core sector output has now declined sequentially for three consecutive months.