Infrastructure sectors’ output growth moderates to 5.2% in March

India’s eight core infrastructure sectors’ output growth moderated to 5.2% in March from an upgraded 7.1% uptick in February, with high growth in Cement and Electricity production offset by contractions in fertilisers and refinery products.

For the full year 2023-24, the core sectors recorded a three-year low growth of 7.5%, compared with 7.8% in 2022-23. However, this also marked the first time in at least 12 years that all eight sectors had recorded annual growth, led by double-digit upticks in steel and coal, even as crude oil output rose 0.6% after 11 years of contraction. 

Notably, with a reading of 173.3 in March, the Index of Core Industries (ICI) was 9.9% over February levels, and marked the highest print in at least seven and a half years. The ICI constitutes a little over 40% of the Index of Industrial Production (IIP).

While all sectors recorded higher production levels compared to February, just six of the eight sectors recorded year-on-year growth as well. Fertilisers contracted 1.3% from last March, marking the third successive month of a drop in output, while refinery products shrank 0.3%.

Steel output grew 5.5%, the slowest pace since July 2022, while natural gas and crude oil production rose 6.3% and 2%, respectively. Cement production and electricity generation rose at a five-month high pace of 10.6% and 8%, respectively. Coal output rose 8.7%, marking the slowest growth since last June. However, coal production levels were 20.7% higher than February.

Economists expect overall industrial output growth to also cool off from the 5.7% uptick recorded in February. The Index of Industrial Production for March will be released on May 10. 

“Similar to the trend displayed by the core sector, IIP growth is likely to moderate somewhat in March 2024, as the leap year effect fades. We project the IIP growth at 3.5-5% in March 2024,” said Aditi Nayar, chief economist at rating agency ICRA.

In 2023-24, steel output grew 12.3%, followed by an 11.7% uptick in coal and a 9.1% rise in cement production. Electricity generation recorded a 7% rise, the slowest in three years, while natural gas output grew 6.1%. Fertilisers and refinery products grew 3.7% and 3.4%, respectively.