Economic recovery losing momentum due to global uncertainty: Expert

The two sectors – fertilizers and cement – where the growth rate has picked up in February this year on year-on-year basis account only for 8 per cent weight within the 8 core infrastructure sectors.

New Delhi: The growth of India’s eight infrastructure sectors, known as core sectors, moderated to 6 per cent in the month of February this year in comparison with the growth recorded during the same month last year as except for fertilizers and cement, the growth rate of six other sectors decelerated. These 8 sectors, coal, crude oil, natural gas, refinery products, steel, cement, electricity generation and fertilizers account for 40 per cent weight in the country’s overall Industrial Production Index (IIP).

These two sectors – fertilizers and cement – where the growth rate has picked up in February this year on year-on-year basis account only for 8 per cent weight within the 8 core infrastructure sectors. In other words, in six other core infrastructure sectors having 92 percent weight in the core industries, the growth rate has decelerated on a year-on-year basis.

These sectors are coal which has over 10 per cent weight in the core industries recorded 8.5% y-o-y growth in February which is four-month low). Similarly, natural gas production, which has 6.88 percent weight in the core industries, recorded a modest growth of just 3.2% on a y-o-y basis in February. Petroleum refinery products which have the highest 28.4 percent weight in core industries recorded a modest 3.3% y-o-y growth in the last month which is a three-month low).

Steel production which has 17.92 percent weight in core industries recorded 6.9% y-o-y growth in February while electricity generation which has nearly one-fifth weight in core industries recorded a modest growth of 7.6% in February this year which is a four month low.

The output of crude oil declined 4.9 percent y-o-y in February 2023 which was the sharpest pace of contraction in 20 months. Similarly, the power generation dropped to a nearly flat growth of 1 percent till 30 March 2023 over the same period last year. This is the slowest growth since January 2022. The increase in the y-o-y growth in the cement sectors came on the back of an uptick in the public sector capital expenditure in the same period.

According to the latest official data, the capital expenditure of 21 states that account for over three-fourth of all state governments capital expenditure in the country, jumped by 46.6 percent in February this year in comparison with their capital expenditure in February last year, pushing the demand for cement and steel.

As a result the demand for cement improved by 7.3% in February this year in comparison with the cement’s demand in January this year. However, the overall growth rate of 8 core industries moderated to 6 percent in February this year which is a three month low.

“Overall, it appears that the recovery is weak and losing momentum due to the global economic uncertainty,” said Sunil Sinha, Principal Economist at India Ratings and Research. According to Sinha, the output of seven sectors stood higher than the pre-Covid level (February 2020) in February this year but in January this year the output of all 8 core sectors was higher in comparison with their production during the pre-Covid period.