The country’s infrastructure output grew 3.2 per cent in August, up from 3 per cent in July, driven by the steel and fertiliser sectors, data released by the Ministry of Commerce showed.
The steel sector output grew 17 per cent in August compared with a contraction of 0.5 per cent in July. The fertiliser sector was one of the only other two sectors that saw an improvement in their performance, growing at 5.7 per cent in August compared with a contraction of 4.3 per cent in July. The cement sector was the third to see an improvement in August.
‘Propped up’
“A 37-month high expansion of steel output propped up core sector growth in August 2016, amid a deteriorating performance of five of the other industries,” Aditi Nayar, Vice President & Senior Economist, ICRA said.
“The sharp rise in steel output growth in August 2016 benefited from the measures announced by the Government of India.”
Sunil Sinha, Principal Economist, India Ratings & Research said: “However, much should not be read out of the double digit growth witnessed by steel sector as this growth is on a very low base (steel had witnessed a contraction of 3.3 per cent in August 2015). Even growth in fertiliser production should be viewed against the good monsoon witnessed this year as against the monsoon failure last year.”
Steel also has the second-highest weightage in the Index of Core Industries after the electricity sector.
Thermal electricity
The electricity sector saw a marginal growth of 0.1 per cent in August, slowing from the 1.6 per cent pace seen a month earlier.
“The deterioration in the performance of electricity generation was driven by the contraction in thermal electricity,” Ms. Nayar said.
“To some extent, better rainfall as compared to 2015 has muted demand for electricity for irrigation and other end-use. The financial situation of some discoms also poses some constraint to offtake of power.”
The coal sector saw a contraction of 9.2 per cent in August compared with a strong growth of 5.1 per cent a month earlier. The crude oil sector entered its sixth month of contraction, contracting 3.9 per cent in August compared with a contraction of 1.8 per cent in July.
Refinery output
The natural gas sector witnessed a sharp contraction of 5.7 per cent in August, down from a growth of 3.3 per cent in July. Refinery products saw slowing growth in August, coming in at 3.3 per cent down from the robust 13.7 per cent seen in July.
The cement sector grew 3.1 per cent in August, up from 1.4 per cent in July.
“The improvement in growth of cement output, albeit muted, is a relief, following the sharp slowdown in growth in July,” Ms. Nayar added. “Overall, there is nothing to cheer about so far as the core sector data of August 2016 is concerned and indicative of sluggish nature of industrial activity in the economy,” Mr. Sinha said.
SOurce: THe Hindu