Cement, steel at the core of strongest infrastructure show in a year

Posted on 02 January 2018
 

Source: The EconomicTimes

India's infrastructure sector logged the highest growth in more than a year in November, while the country's biggest carmakers reported double-digit sales growth in December, kicking off the new year on a positive note for the economy and pointing to a persistent revival trend.

The index of eight core industries rose 6.8% in November, the government data showed, riding high on growth in cement and steel sectors. These have a weight of more than 40% in the Index of Industrial Production (IIP), suggesting strong industrial growth in November after a dismal October.

"Steel and cement growth at very high growth rates of 16.6% and 17.3% indicates restoration of the production in these sectors over pre-demonetisation levels which augurs well for real sector investment," said economic affairs secretary Subhash Chandra Garg.

Favourable Base Effect
Part of the rise is due to the favourable base effect stemming from the disruption in the wake of demonetisation in November 2016 that will prevail over the next few months. The core sector grew 3.6% in November 2016. The core sector growth in November 2017 was the best since 7.1% in October 2016.



Ratings agency ICRA expects industrial growth to revive to a "healthy" 5-6% in November against 2.2% in October.

"The early indicators for industrial production in the organised sectors in November 2017 provide favourable signals, such as the uptick in growth of the core sector and sharp improvement in the expansion of automobile production and non-oil merchandise exports," said Aditi Nayar, principal economist, ICRA.

IIP data for November will be released on January 12.



India's GDP growth recovered to 6.3% in the July-September period from a three-year low of 5.7% in the preceding quarter. Most experts had expected a stronger rebound as the impact of demonetisation and rollout of the goods and services tax (GST) in July had faded.

"Cement and steel have grown, which means infrastructure industries are likely to show good growth in IIP," said Devendra Pant, chief economist at India Ratings.

Pant said this also shows that construction activity is likely to be better in the near future, led by affordable housing and road building.

The country's largest car maker Maruti Suzuki reported a 11.4% rise in sales in December. Other big auto manufactures also reported robust numbers.

The eight infrastructure sectors included in the index are coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. These sectors notched up a cumulative growth of 3.9% in the April-November period. October growth was revised up to 5% from 4.7% estimated initially.

Coal output declined 0.2% in November compared with a 3.9% increase in October. In line with the weak performance of coal, the growth of electricity generation declined to a low 1.9% in November from 3.2% in October. Refinery production rose 8.2% versus 7.5% in October. Crude oil output rose a marginal 0.2%. Natural gas and fertilisers showed a 2.4% and 0.3% increase in production last month respectively. 



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