India’s infrastructure output grows by 4.3 per cent in May, Energy News, ET EnergyWorld


New Delhi: India’s core sector grew 4.3 per cent in May, unchanged from April as the drag from slower global growth dented the gains from strong government capital expenditure that lifted key sectors like cement and steel.

Sequentially, the Index of Eight Core Industries rose 3.5 per cent in May, data released on Friday showed.

“Capex cycle indicators show continued recovery with strong growth in cement and steel production,” said Gaura Sengupta, India Economist, IDFC First Bank.

The government released additional tax revenues to states in June to sustain the capex push. Last Monday, it announced Rs 56,415 crore of interest-free and long-term capital expenditure loans to 16 states.

The core sector index, which measures the output of key infrastructure sectors-coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity-has a 40 per cent weight in the Index of Industrial Production (IIP)

Economists expect industrial growth to nudge up from 4.2 per cent in April.

“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,” said Aditi Nayar, chief economist, ICRA.

Nayar expects IIP growth to print between 4-6 per cent in May 2023.

Domestic push, global drag

Cement and steel output grew 15.5 per cent and 9.2 per cent respectively in May from a year earlier.

Coal output rose 7.2 per cent in May compared to 9.1 per cent in April, getting a lift from the higher demand from power and steel sectors.

Ahead of the kharif sowing fertilisers production jumped 9.7 per cent in May compared with 23.5 per cent in the preceding month.

Madan Sabnavis, chief economist, Bank of Baroda, said growth in fertilisers “will continue to remain robust for the next two months to keep pace with the kharif sowing requirements.”

Crude oil production contracted 1.9 per cent in May from a year ago while natural gas production dropped 0.3 per cent.

“The oil basket however continued to disappoint with negative growth for crude and natural gas. Lower global crude prices normally is associated with lower domestic production,” Sabnavis noted. The electricity generation sector recorded a third consecutive month of contraction at 0.3 per cent in May.

“The persistent slowdown in electricity production will need to be monitored as it could indicate some moderation in industrial activity,” Sengupta said. “Other high-frequency indicators show softness in freight transport services, which also indicates moderation in industrial activity.”

  • Published On Jul 1, 2023 at 08:02 AM IST

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