June IIP: Core sector growth at five-month high of 8.2%

• On a YoY basis, June 2023 core sector growth was lower as the reading was 13.1% in 2022.
• Growth was positive in seven sectors with the exception of crude oil which declined marginally.
• Electricity and fertilizer production slowed due to a sharp base effect.
  

The growth of India's eight key infrastructure sectors slowed down to 8.2% in June 2023 as compared to a year-ago period but managed to hit a five-month high. The reading saw a decline in the production of crude oil, natural gas, and electricity, according to the official data released on Monday. The core sector growth was 13.1% in June 2022.

In January, the key sectors expanded at 9.7% while in May 2023 the growth rate was 5%. The output growth of the eight sectors slowed down to 5.8% in April-July 2023-24 against 13.9% in the year-ago period.

‘Growth is broad-based’

Growth has been broad-based thus reflecting buoyancy in the infrastructure sector this year, opined Madan Sabnavis, chief economist at Bank of Baroda. With the exception of crude oil which declined marginally, growth was positive in the other seven sectors.

Refinery products grew by 4.6% compared with 15.1%, mostly due to slowdown in exports. Domestic demand for refinery products like petrol and diesel has been steady.

Coal continues to grow well at 9.8%, thanks to a recovery in electricity growth as well as the steel sector. Steel witnessed growth of 21.9% while cement registered 9.4% growth.

“The government push in infra has been reflected here, especially roads. Cumulative growth in these two sectors was double digits in the three months even on a higher base witnessed in 2022,” Sabnavis said.

Electricity growth slowed to 3.3% over 16.5% last year – due to an impact of the base effect.

Fertilizer production growth has slowed down to 3.4% over 8.2%, again due to a sharp base effect. Bank of Baroda expects growth to be lower in coming months as farmers start sowing for kharif season normally in June and July after which demand slows down.

“Overall growth in IIP could be expected to be in the 5-6% range this month (July),” said Sabnavis.

(With PTI inputs)