India’s eight key infrastructure industries growth reached a 32-month high of 6.8 per cent in March as compared to a year earlier, mainly due to a low base, data released by the commerce and industry ministry showed.
Core sector output had contracted 37.9 per cent in April last year, with the imposition of a nationwide lockdown. While the pace of contraction declined in the subsequent months, positive growth was seen only in December and January. In fact in February, there was a degrowth of 3.8 per cent after mild growth in the previous months.
The cumulative growth during April-March (2020-21) was 7 per cent.
Experts said that a sharp growth in March should be interpreted with caution and the trend will continue to be the same over the next two months.
“The March, April and May growth numbers for the core sector and industrial growth were expected to be high and misleading as they come on the back of sharp declines registered last year. In fact March was just the beginning of the lockdown which pushed back economic activity after which there were even sharper declines,” Madan Sabnavis, Chief Economist at Care Ratings said.
Out of the eight sectors, steel, cement, electricity and natural gas witnessed a double digit growth in March. A closer look at the data shows that steel and cement output also declined sharply in March, 2020 as compared to a year earlier. The sharp rise to some extent can be attributed to base effect as the government imposed a nationwide lockdown in the last week of March 2020.
“However, also end-of-the-year phenomenon of infra projects being on track did provide impetus to cement and steel in particular. States and centre have been expediting their capex which gets reflected in these numbers,” Sabnavis said.
The remaining sectors-- coal, crude oil, fertiliser and refinery products are yet to get back to last year’s level.
Experts said that despite localised lockdown amid a second wave, core sectors will continue to grow sharply in April, mainly driven by a base effect.
“We have observed a slackening in the sequential momentum in April 2021 in electricity demand, vehicle registrations, and generation of GST e-way bills, revealing the impact of the recent surge in covid infections and localised restrictions. For instance, after a YoY expansion of 48 per cent in electricity demand at all-India level during Apr 1-9, 2021 on the low base, the pace moderated to 36% during Apr 10-25, 2021,” Aditi Nayar, Chief Economist, Icra said.
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