Eight key infrastructure sectors grew 4.3% year-on-year in May, the same rate as in the previous month, but much slower compared with 19.3% in the year-ago period, official data showed on Friday. A strong expansion in production of steel and cement, both construction inputs, as well as the coal segment boosted the relevant index, even as refinery products, the one with the highest weight, recorded a modest growth.
The performance of the crude oil & natural gas and electricity segments were dismal, with all reporting contraction on the Y-o-Y basis.
On a sequential basis, the core sectors expanded 3.5% in May.
The output growth of these eight sectors slowed down to 4.3% in April-May this fiscal, against 14.3% in the year-ago period.
The trend in recent months doesn’t signify a solid industrial revival, but reveal the resilience of the economy against global headwinds. From July, the base will become favourable.
The eight core sectors have a combined weight of 40.3% in the index of industrial production (IIP).
Among sectors, coal production increased 7.2%, aided by the focus of Coal India and private captive miners on raising output to meet the higher demand from thermal power units during summer months. Crude oil production declined by 1.9%. A sluggishness in demand for natural gas, partly owing to high prices, led to a marginal decline of 0.3% in output.
Production of petroleum refinery products, which have a weight of 28% in the core sector index, increased 2.8% in May while steel production rose 9.2%.
Cement output expanded 15.5%, recording the second consecutive month of double-digit growth.
Electricity generation contracted for the third consecutive month, with subdued demand partly on account of relatively cooler temperature owing to the unseasonal rainfall ahead of monsoon.
“Although the YoY growth in core output remained steady, the performance of a majority of the available high-frequency indicators improved in May 2023 relative to April 2023. Consequently, ICRA expects the YoY index of industrial production (IIP) growth to print at ~4-6% in May 2023,” said Aditi Nayar, chief economist, head – research & outreach, ICRA.
Industrial production growth rose to 4.2% in April from 1.7% in the previous month, aided by the manufacturing and mining sectors. Manufacturing sector’s output grew 4.9% in April, against a 5.6% growth in the year-ago period, indicating a modest recovery in the sector that has long been in the doldrums.
As per use-based classification of IIP, the capital goods segment recorded a 6.2% growth in April compared to a 12% expansion a year ago. Consumer durables output during the month declined 3.5%, against a 7.2% growth a year ago; consumer non-durable goods output grew 10.7% in April, against a contraction of 0.8% a year earlier.