India's infrastructure output contracts for the first time in more than 3 years

By Manoj Kumar

NEW DELHI (Reuters) -India's infrastructure output fell by 1.8% year-on-year in August, marking its first contraction since February 2021 as heavy rains hurt coal and electricity production, government data showed on Monday.

Infrastructure output, which makes up 40% of India's industrial production and tracks activity across eight sectors, had grown by 6.1% in July.

"Excess rainfall impacted mining activity, with the output of coal, crude oil, and natural gas declining, while also leading to a contraction in electricity generation in the month," said Aditi Nayar, chief economist at ICRA rating agency.

Given these trends, industrial output growth could slow down sharply to about 1% in August 2024 from 4.8% in July 2024, she said.

Prime Minister Narendra Modi has stepped up state spending on infrastructure, proposing to invest 11.1 trillion rupees ($132.5 billion), about 3.4% of GDP, in the fiscal year ending in March 2025, to boost economic growth.

Infrastructure output in February 2021 had contracted 3.3% year-on-year, according to government data.

Coal production fell 8.1% in August compared to a 6.8% growth in July, while electricity generation fell 5% in August from 7% growth in the previous month.

Steel production grew 4.5%, against a 7.2% increase a month earlier. Cement output fell 3% year-on-year, compared with July's 5.5% rise, and fertiliser production increased 3.2%, against a 5.3% rise in the previous month.

Output of refinery products fell 1% compared with an increase of 6.6% in July.

Crude oil production fell 3.4% compared with a fall of 2.9% in July. Natural gas output fell 3.6% compared to a 1.3% decline a month ago.

($1 = 83.7700 Indian rupees)

(Reporting by Sarita Chaganti Singh and Manoj Kumar; Editing by Mrigank Dhaniwala and Nivedita Bhattacharjee)