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  Business   Market  03 Jul 2018  Infra growth hits 10-month low

Infra growth hits 10-month low

THE ASIAN AGE.
Published : Jul 3, 2018, 12:13 am IST
Updated : Jul 3, 2018, 12:13 am IST

Dip in crude oil, gas production and favourable base effect waning off cited as reasons.

This is the lowest growth rate since July 2017 when infrastructure industries had expanded by 2.9 per cent.
 This is the lowest growth rate since July 2017 when infrastructure industries had expanded by 2.9 per cent.

New Delhi: India’s infrastructure growth plummeted to a 10-month low of 3.6 per cent in May due to a decline in production of crude oil and natural gas.

Infrastructure output, which comprises eight sectors such as coal, crude oil and electricity, accounts for nearly 40 percent of country’s industrial output.

These eight sectors had expanded by 3.9 per cent in May 2017, according to the data released by the commerce and industry ministry on Monday.

This is the lowest growth rate since July 2017 when infrastructure industries had expanded by 2.9 per cent. The growth rate in April was 4.6 per cent.

“The slide in the pace of growth of steel and cement, in conjunction with an unfavourable base effect, was the chief driver of the sequential dip in core sector expansion to a 10-month low in May 2018,” said Aditi Nayar, principal economist, at Icra.

“Disaggregated data reveals mixed trends, with a sequential rise in growth of electricity, fertilisers and refinery products, accompanied by a decline in the pace of expansion of five items as well as contraction in two of the eight constituents, namely crude oil and natural gas,” she pointed out.   

She said that double digit growth in coal output remained the largest driver of core sector expansion in May 2018.

“Nevertheless, the deterioration in the performance of coal, crude oil and natural gas in May 2018 relative to the previous month, is likely to weigh upon the performance of mining. The continued contraction of the coal sector in June 2017 suggests that its growth may persist in double-digits in the just-concluded month, before moderating in Q2 FY19,” added Nayar.

She said that sharp moderation in the expansion of cement output in May 2018 was partly on account of the waning of the favourable base effect. “With a recovery in the affordable and rural housing markets and a pickup in infrastructure and construction, ICRA expects cement production in India to expand by 6 per cent in FY19, exceeding the performance recorded in May 2018,” she said.  

As per the data crude oil and natural gas registered a negative growth of 2.9 per cent and 1.4 per cent respectively in May compared to the year-ago period.The growth rate of refinery products, steel and electricity declined to 4.9 per cent, 0.5 per cent and 3.5 per cent in May from 5.4 per cent, 3.8 per cent and 8.2 per cent respectively  in May 2017. However, output of coal and fertiliser grew by 12.1 per cent and 8.4 per cent, respectively, in May over the year-ago month.   

Tags: icra, crude oil, natural gas