Hopes of a strong industrial rebound received a major jolt on Wednesday with the country’s infrastructure sector output clocking a mere 1.8 per cent year-on-year growth in July, as refinery products and steel output recorded a dismal performance.
The six infrastructure industries — crude oil, petroleum refining, coal, cement, finished steel and coal — account for 26.68 per cent of the total industrial production.
Petroleum and refinery products showed a 14.4 per cent dip as opposed to an 11.8 per cent growth a year ago.
Poor infrastructure output growth could have a bearing on the overall industrial output that has shown signs of strong recovery in recent months.
Factory output had risen 7.8 percent in June, the strongest growth in 16 months triggering hopes of a strong economic rebound in the coming months.
Data published earlier, including that of automobile production, had already indicated industrial output would expand in June, even though exports faltered.
The key question is whether this trend can be sustained.
“There are both tailwinds and headwinds to industrial output growth. On the positive side, the global economy is gradually recovering. On the downside, the risk of a deficient monsoon hurting industrial output growth through lower rural demand for consumer goods is real,” said Sonal Varma, analyst with Nomura Financial Adivosry Securities.
The government has identified infrastructure as the major growth engine and will soon launch a public private partnership programme in the world to build more than 15,000 km of highways involving an investment of over $70 billion.