NEW DELHI:India’s key infrastructure industries grew at a sluggish pace in March, weighed down by a contraction in output of natural gas and crude oil, suggesting that broader industrial growth may remain muted.
Output at eight core industries-coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity-grew at an annual rate of 2% in March against a 6.9% rise in the previous month, data released on Monday showed.
These industries have a 38% weight in the index of industrial production or IIP.
“It is a bad number, but not a surprise,” said Madan Sabnavis, chief economist at CARE Ratings.
IIP had risen 4.1% in February. The reading for March will be released on May 11.
The core sector registered a cumulative growth of 4.3% in 2011-12, compared with 6.6% in the previous fiscal.
Growth in all the eight industries decelerated from the previous month with natural gas and crude oil recording contraction.
Crude oil production slipped into the negative zone at -2.9% from 0.3% in February. It had grown at an impressive 12.1% in March 2011.
Output of natural gas saw the sharpest decline at -10.1% during the month. The sector has been in contraction for over a year because of stagnation in production at the KG-D6 basin.
The only bright spot in the numbers was the relatively robust performance of coal. The sector grew 6.8% in March, compared to a contraction of 1.1% in the same month last year.
This is being seen as a big positive as about 55% of India’s power generation capacity is based on thermal coal.
“Growth in coal production will help the power sector and also help in controlling the current account deficit,” added Sabnavis.
Cement registered the highest growth in the index at 7.1%, compared with a 9.8% rise in the previous month. Steel production at 2.3% was lower than the 4.7% growth seen in February.
Cumulative growth in cement and steel stood at 6.7% and 7%, but economists warned that outlook was not good.
“Growth in steel and cement would not sustain if our GDP continues to drop,” said DK Joshi, chief economist at ratings agency Crisil.
Fertilizer production rose 1.5% in March from a year ago.
Electricity production in March fell to its lowest in more than a year at 2.1%, with cumulative growth for the full year at an impressive 8%.
Economists, however, said it was difficult to draw out a path for the macroeconomy based on the core sector’s performance.
“It is difficult to draw trends from this data,” said Jyotinder Kaur, economist with HDFC Bank. “Different pockets of infrastructure are performing differently, each with its own issues on the regulatory front.”