India’s infrastructure sector witnessed a significant slowdown in February, with growth plummeting to a five-month low of 2.9%, compared to the robust 7.1% recorded in the same period last year. The latest data from the Ministry of Commerce and Industry paints a concerning picture of a cooling economy, as sluggish performance across key industries signals the need for renewed policy focus and investment. The decline in output, which follows a relatively stronger expansion of 5.1% in January, raises fresh concerns over the sustainability of industrial momentum amid broader macroeconomic uncertainties.
A closer examination of the data reveals that crude oil and natural gas production registered negative growth, exacerbating concerns about India’s reliance on energy imports and its struggle to boost domestic extraction capabilities. The coal sector, which had been a pillar of growth in recent months, saw its production growth slow to 1.7% from the impressive 11.6% expansion a year earlier. Similarly, refinery output and steel production also witnessed a sharp deceleration, posting growth of just 0.8% and 5.6%, respectively. Electricity generation, a crucial indicator of industrial activity, also lost steam, expanding by just 2.8% compared to 7.6% in February 2024.
While most core sectors grappled with a downturn, fertiliser and cement production emerged as bright spots, posting growth rates of 10.2% and 10.5%, respectively. These gains suggest resilience in the agricultural and construction sectors, supported by increased government expenditure and a stable demand environment. However, the overall moderation in infrastructure output has resulted in a cumulative core sector growth of just 4.4% for the April-February period of the current fiscal year, significantly lower than the 7.8% recorded during the same period last year.
The deceleration in core sector growth could have far-reaching implications for India’s economic trajectory. With infrastructure development playing a pivotal role in employment generation, urbanisation, and industrial expansion, the slowdown raises questions about the pace of capital investment and project execution. The government’s ambitious infrastructure push, driven by initiatives such as the National Infrastructure Pipeline, must navigate multiple headwinds, including global economic volatility, fluctuating commodity prices, and evolving energy dynamics. As India aspires to sustain its growth momentum while transitioning towards a greener and more resilient economy, a recalibrated approach to infrastructure expansion and investment will be crucial in ensuring long-term economic stability and sustainability.
