Why has infrastructure production growth hit a 9 month low?


Covid wounds in India’s economy have yet to heal. Recently released core sector data shows that the decline in electricity demand has slowed infrastructure production growth to a nine-month low, a clear sign that economic activity is not yet in need of a steady pace.

Infrastructure production growth in the country slowed to 3.1 percent year-over-year in November, hitting its lowest level in nine months due to lower power and steel production growth of 8.4 percent in the previous month, the government data showed on Friday.

With the exception of the crude oil and cement sector, the production level of all infrastructure industries was above the level of November 2020. The cement sector recorded a decline of 3.2 percent in November 2021 despite a low base.

Core sector growth declined to less than expected 3.1 percent in November 2021, from a revised 8.4 percent in October 2021, providing further evidence that post-Christmas momentum related to strong supply disruptions in parts of southern India Aditya Nair, chief economist at ICRA, has subsided.

“The slowdown was pervasive in six of the eight core sectors, with cement production shrinking year over year (YoY). Additionally, YoY growth only saw fertilizer production increase in November 2021 from the previous month. As Rabi sowing progressed, all core sectors with the exception of coal and petroleum refined products showed moderation on a month-to-month basis, amidst the festive season holidays and rain-related disruptions in southern India. The sharpest decline in MoM was in cement, with a massive 21.1 percent while steel production fell by a relatively muted 5 percent, “Nair said in a statement.

Commenting on the core sector data, India Ratings and Research said a broad-based recovery is still a long way off.

“India Ratings and Research therefore assumes that a broad-based recovery is still a long way off and that the spread of the Omicron variant of COVID 19 is likely to further increase uncertainty. Against this background, core sector production is expected to be subdued and stays closed. ” Will rise to mid-single digits on December 31, 2021, “India Ratings said.


Comments are closed.