Infra sector growth picks up

New Delhi: India’s infra sector grew fastest in the last 16 months at 6.4 per cent in March led by a pick-up in refinery products, fertilisers and cement production, government data showed on Monday.

This is the highest monthly growth since November 2014, when these sectors had expanded by 6.7 per cent. The eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — make up around 38 per cent of  the Index of Industrial Production (IIP). Any improvement in the core sector growth will reflect positively on the country’s industrial growth.

As per the data, fertiliser production increased by 22.9  per cent in March, cement production up by 11.9  per cent, and electricity generation increased by 11.3  per cent.

Coal production increased by mere 1.7  per cent in March. Crude oil and natural gas production saw a contraction in March. “The pick-up in the momentum of core sector growth to a 16-month high in March 2016 was a positive surprise.

The core sector growth was powered by the double-digit expansion in electricity, cement, refinery products and fertilisers, even as growth of coal output waned, and crude oil and natural gas slipped back into contraction,” said Aditi Nayar, senior economist at rating agency ICRA. “A favour-able base effect as well as the pick-up in the pace of expansion of the core sector and automobile production augur well for a mild improvement in IIP growth in March.”

She said that the slowdown in growth of coal output notwithstanding, adequate inventories supported a robust growth of thermal electricity generation in March 2016. Moreover, the plant load factor was maintained at 65 per cent in that month.

“Despite the prospects of higher demand following a favourable monsoon, the growth of fertiliser production may ebb in the near term, as double-digit growth in seven of the last eight months has contributed to high inventory levels. While fertilisers recorded 23 per cent growth in March, their small weight in the core sector index would limit the overall boost to industrial growth,” said Ms Nayar.

She said sustained the high growth of cement output for three consecutive months is encouraging. The growth recorded by the steel sector after several months of contraction is due to steps taken by the government to curb steel imports.