NEW DELHI: India’s infrastructure output contracted 1.5% in November 2019, the fourth consecutive month that infrastructure growth, measured by an index of eight core industries shrank, placing doubts about the government’s assertions that there would be a growth rebound in 2020.
The data showing India’s infrastructure growth contraction came on a day when the government also announced with much fanfare a pipeline of infrastructure projects worth Rs 102 lakh crore spread between 2020 and 2025 to give a major push to the country’s creaking infrastructure with much of the money to be spent on power, road, railway and urban housing infrastructure.
Analysts, of course, were quick to point out that with the Centre spending only 39% of the monetary outlay, this meant an average spend of Rs 8 lakh crore a year, almost the same the Centre was spending under normal circumstances. “The slowdown where demand is contracting so severely that many manufacturing sectors are seeing sales shrinking, needs to be given stronger spending medicine,” said Prof Arun Kumar, Malcolm Adiseshiah Chair at the Institute of Social Sciences.
Economists and industrial barons have been advocating a spending splurge by relaxing the fiscal deficit target to create jobs and demand for goods and services. India’s economy grew just 4.5% in the July-September quarter. Passenger car sales tanked 18% during April-November 2019.
The core sector industries, too, reflected a similar trend, reporting nil growth between April and November 2019 compared to 5.1% in the same period in 2018. Growth of coal, crude oil, natural gas, refinery products and cement were all in the negative territory during November, while electricity barely grew at 0.7%. Only steel and fertilisers reported positive single-digit growth.
CAD narrows on lower trade deficit
The current account deficit (gap between forex inflows and outflows) shrank to $6.3 bn or 0.9% of GDP in the Sept 2019 quarter, against $19 bn (2.9% of GDP) a year ago due to lower trade deficit, according to RBI.