New Delhi: Even though sequential growth slowed down in June, India’s eight infrastructure sectors experienced double-digit growth for the second consecutive month.
According to information made public by the industry department on Friday, the core sector expanded 12.7% year over year in June while contracting 4.1% sequentially.
ICRA’s senior economist, Aditi Nayar, noted that core sector growth had moderated pretty broadly, from 19.3% in May to 12.7% in June, which reflects the base’s resetting.
“The core sector reported 8 per cent growth in June 2022 from the pre-Covid level, with a healthy performance from all the sectors, except steel and crude oil. In line with the moderation in the YoY performance recorded by most high-frequency indicators, as well as the core sector in June 2022, we expect IIP growth to ease to around 11-13 per cent in that month,” she said.
The core sector data’s disaggregated trends are incredibly inconsistent, ranging from a contraction of 1.7% for crude oil to a strong rise of 31.1% for coal.
Except for coal, June saw double-digit rise in cement, refinery products, and power generation; growth in steel and natural gas was much more subdued.
Madan Sabnavis, chief economist at Bank of Baroda, said core sector growth is impressive given a high base of 9.4 per cent in June 2021. “The pick-up in economic activity meant that power demand increased and coal production kept pace. After June, due to the monsoons, we can expect a moderation for coal. We may expect industrial growth for the year to be closer to the 9-10 per cent mark in June,” he added.
The International Monetary Fund (IMF) cut its GDP prediction for India for FY23 by 80 basis points, to 7.4%, citing less favourable external conditions and the central bank’s quickening of monetary policy.
A global recession in 2022 is ruled out by the growth projection of 3.2%, according to the IMF’s update to the April World Economic Outlook, but there are a number of variables that could harm the performance of the global economy, it added.
The Asian Development Bank cut its growth forecast for India from 7.5% to 7.2% for FY23, citing higher-than-anticipated inflation since April and consequent monetary tightening by the central bank, days before the IMF revised its growth forecast for India downward.
Inflation in India stayed above the RBI’s upper tolerance range in June for a sixth consecutive month.
Following an off-cycle rate increase of 40 basis points in May, the six-member Monetary Policy Committee (MPC) of the RBI increased the repo rate by 50 basis points on June 8.
A second rate increase is anticipated by analysts at the MPC meeting on August 5.