India’s eight infrastructure sectors grew 16.8% in May because of the low base of last year, while statewide lockdowns because of the second wave of the coronavirus pandemic meant the output actually contracted 3.7% from April.
The core sector had registered 60.9% growth in April, as a nationwide lockdown was imposed by the government last year to curb the spread of the coronavirus pandemic.
Data released by the industry department on Wednesday showed that as state-level restrictions increased, cement, electricity, refinery products and steel reported a sequential decline in growth, whereas fertilizer and crude oil output contracted.
Aditi Nayar, chief economist at ICRA Ratings, said with the base becoming less distorted and the widening of state-wise restrictions, the core sector expansion expectedly flattened in May.
“Based on the core sector data as well as the performance of other high-frequency indicators such as auto production, exports and generation of GST e-way bills, we expect the index of industrial production growth to moderate substantially to 20-25% in May from a high 134.4% in April,” she added.
{{/usCountry}}“Based on the core sector data as well as the performance of other high-frequency indicators such as auto production, exports and generation of GST e-way bills, we expect the index of industrial production growth to moderate substantially to 20-25% in May from a high 134.4% in April,” she added.
{{/usCountry}}High-frequency data show the economy may have bottomed out in May with states beginning the unlocking process in early June, as the second wave of the pandemic started ebbing.
However, depressed consumer sentiment and weak rural demand are expected to hamper any sharp recovery in economic activity. Most economists have slashed their growth forecasts, with the World Bank paring it down to 8.3% from 10.1% earlier.
Separately, data released by the Controller General of Accounts showed that the central government has exhausted just 8.2% of its full-year fiscal deficit target in the first two months (April-May) of FY22, compared to 59% during the same period a year ago, as government expenditure remained constrained by regional lockdowns while revenue receipts improved significantly.