On the back of a capex push by the Centre, the output of the infrastructure sectors grew in May at the highest rate. Cement, fertilisers, electricity, petroleum & refinery products, and steel are some other sectors that experienced double-digit growth.
The data released by the industry department showed broad-based improvement in core sector growth benefiting from a low base, with the exception of coal which continued to record a high double-digit growth for the second consecutive month. The other sectors that experienced double-digit growth were cement, fertilisers, electricity, petroleum & refinery products, and steel.
The construction sector is the second- largest employment provider after agriculture, and it has seen robust growth in the cement and steel sector. The support came mainly from the government, as the capex by the Union government grew by a strong 70.1 per cent in April- May 2022, said India Ratings’ principal economist.
In the first two months of the fiscal year, the Union government’s capital expenditure budget has been exhausted.
After a gap of 53 months, crude oil output grew by 4.5 per cent. Positive crude oil production is good news at a time when the country is facing challenges due to elevated global crude oil price and related ramifications on the economy.
The index of industrial production is expected to expand by 16-19 per cent in May, thanks to the high growth in the core sector, as well as various other high-frequency indicators, according to Aditi Nayar, chief economist at ICRA Ratings.
If the core sector output was sustained, it would be a big positive for the economy. The rebound in economic activity despite the Russia-Ukraine conflict is a silver lining.
Many professional forecasters have reduced their forecasts for India. The Reserve Bank of India has retained its growth projection of 7.2 per cent for FY23, but the Organization for Economic Cooperation and Development (OECD) has slashed India’s growth forecast to 6.9 per cent from 8.1 per cent. The growth estimate for FY23 has been cut to 7.8 per cent from 8.5 per cent due to the impact of the global commodity price shock.
The Reserve Bank of India raised policy rates by 50 basis points last month in order to curb inflation. Many banks have increased their lending rates as a result of the rate action, which is expected to hurt the growth of the economy.
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