With rising input costs and high interest rates, growth in eight key infrastructure sectors slowed down to 2.3 per cent in September from 3.3 per cent a year ago.
The numbers were discouraging even compared to August when the infrastructure sectors grew by 3.7 per cent.
Coal, natural gas and fertilizer showed decline in output raising concerns for the industry and government.
The coal was the worst performer recording a huge negative trend of 17.8 per cent. Natural gas too showed a decline in production by 6.4 per cent while fertilizers were down 2.1 per cent, according to official data released on Monday.
Heavy rains in coal mining areas and strike by workers in Coal India are stated to be among the main reasons for downfall in coal production.
“Coal and natural gas have their own problems. It is more due to sectoral challenges like environmental clearance, land issues and low natural gas production in KG-D6 (Krishna-Godavari) basin.
“Unless there is growth in these important sectors over next few months they may become a bottleneck for production in other sectors,” Standard Chartered Bank Head of Research Samiran Chakraborty said.
The decline in growth was also witnessed for the cumulative first half of the current fiscal with April-September displaying an expansion of 4.9 per cent against 5.6 per cent in the corresponding period last year.
Cement was unimpressive, expanding by a mere 0.9 per cent and crude oil by just 0.1 per cent.
“Cement and steel have little bit effect of high interest rates,” Mr. Chakraborty said.
Electricity, however, witnessed 8.9 per cent growth in generation, though it was lower than 9.4 per cent in August.
Similar scenario was witnessed in steel which grew by 6.6 per cent, although its expansion was slower than 8.0 per cent in August. Refinery products managed a jump of 4.4 per cent.
The dismal performance of the infrastructure sectors with a weightage of 37.90 per cent in the overall industrial production is likely to weigh on the factory output numbers for September, scheduled to be released on November 12.
“It does not augur well for IIP,” Crisil Chief Economist D K Joshi said.
The industrial sector has been witnessing a slowdown under the combined impact of near double-digit inflation and rising cost of borrowing.
The Reserve Bank has raised interest rates by 375 basis points since March 2010 to rein in inflation.