The growth of India’s eight infrastructure sectors touched a six-month high of 8.4 per cent in April 2022 with increased production of coal, electricity, refinery products, fertilisers, cement and natural gas industries over the corresponding period of last year.
The Index of Eight Core Industries (ICI) measures the combined and individual performance of production in eight core sectors of the economy — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity which in turn comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
Infrastructure industries grew by 8.4 per cent year-on-year in April 2022 from a growth of 4.9 per cent in March 2022, official figures released by the Office of Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT) showed on Tuesday (31 May).
For the April-March 2021-22 fiscal period, core sector industries grew 10.4 per cent on a provisional estimate, as compared to the corresponding period of the last fiscal. The final growth rate of ICI for January 2022 is revised to 4.0 per cent from its provisional level 3.7 per cent.
News of the eight infrastructure sector growth came amidst the National Statistical Office (NSO) estimates of India’s GDP growth at -- a more than expected -- 4.1 per cent in the fourth quarter of the last fiscal year.
For the full fiscal year 2022, the NSO cut economic growth estimate to 8.7 per cent, lower than earlier expectations of 8.9 per cent.
A closer look at the core sector data underlines a positive y-o-y growth in April 2022 for all other infrastructure industries except crude oil and steel. “While the core sector growth rose to 8.4 per cent in April 2022 from 4.9 per cent in March 2022, benefitting from the constrained base of the second wave of Covid-19 in India, it trailed our forecast of 11-12 per cent by a wide margin, dampened by a contraction in steel and crude oil,” says Aditi Nayar, chief economist, ICRA Ratings.
Crude oil production declined by 0.9 per cent in April 2022 over April 2021 and steel production declined by 0.7 per cent in April 2022 over April 2021. India’s crude oil output has remained low for quite some time as per official monthly production statistics and these figures indicate that the country’s dependence on global crude oil will stay elevated amidst global high crude prices.
The low output of the steel industry comes amidst weak domestic demand in India for steel. According to Nomura, in April 2022 steel consumption rose only 1 per cent y-o-y. Key economic indicators for India’s steel demand are sales of passenger vehicles (PV) which rose modestly, current semiconductor shortages and a slowdown in the entry-segment cars and 2W segments led by rising fuel prices and inflationary pressures which remain a key headwind for the steel sector.
The positive growth in core sector in April 2022 over April, 2021 was driven mainly by a growth of 28.8 per cent in coal output. The other sectors that witnessed high growth were electricity (10.7 per cent), petroleum and refinery products (9.2 per cent), fertilisers (8.7 per cent), natural gas (6.4 per cent) and cement production (8.0 per cent).
These industries have a major impact on the Indian economy and significantly affect most other industries, especially infrastructure, and hence expansion in their output is a key indicator of the overall growth prospects of the economy. The government plans to invest about Rs 102 lakh crore on infrastructure projects by 2024-25, involving huge usage of steel, coal, cement and electricity.
During the fiscals 2020 to 2025, sectors such as energy with 24 per cent share, roads with 19 per cent, urban development with 16 per cent, amount to around 70 per cent of the projected capital expenditure in infrastructure in India.
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