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NEW DELHI :
India’s eight infrastructure sectors contracted by a record 6.5% in March after hitting an 11-month high in February, hit by a national blockade to stem the spread of covid-19.
Data released by the industry department on Thursday showed sectors including crude oil (-5.5%), natural gas (-15.2%), refinery products (-0.5%), fertilizers (-11.9%), steel (- 13%), cement (-24.7%) and electricity (-7.2%) saw a contraction in production in the month, except for coal, which grew 4%.
“With the blockade in place throughout April, which is expected to have severely curtailed production in many core sectors, the contraction in central sector output is likely to worsen to alarming levels that month. For example, the blockade has reduced electricity demand by a considerable ~ 24% until April 27, “said Aditi Nayar, chief economist at Icra Ltd.
With the weak show in March, India’s central sector grew by just 0.6% in FY20, lagging behind a 4.4% increase in FY19, which will have an adverse impact on factory production and, later, in economic growth. The eight main industries comprise 40.27% of the weight of the articles included in the Industrial Production Index (PII).
Most forecasters have drastically lowered growth projections for India for both fiscal year 20 and fiscal year 21. Swiss bank UBS lowered its GDP growth projection for the year ended March 31 on Wednesday. 4.1% from the previous 4.5%. Now he expects India’s economy to contract 0.4% on the current tax from his previous estimate of 2.5% growth. UBS warned that if mobility brakes as part of the ongoing blockade remain in place until June and economic activity returns to normal in late August, then the economy may contract 3.1% in fiscal year 21.
Ratings agency Crisil Ltd said Thursday that the blockade could lead to a permanent loss of real GDP of around 4% in fiscal year 21 and that government fiscal policy must be flexible and responsive to limit damage. “The government should complete welfare measures to address disruptions to the income of the households of the vulnerable in cash and in kind. It should also provide more support to companies, particularly small and medium-sized companies, through direct support and guarantees, “he said.
