A day after data on direct tax collections indicated dismal growth in key sectors, the bad news was confirmed on Friday by fresh data on the growth of six core infrastructure sectors, which showed they had grown by just 3.9% in the first half of current financial year, a sharp dip from 6.9% for April-September last year.
The data on a crucial part of the index of industrial production showed the growth of six sectors – crude oil, petroleum refining, coal, electricity, cement and finished steel – was 5.1% for September this year over the same month last year. These sectors constitute a little more than a quarter of the weight of the IIP but these being vital inputs for other industries, the weakening of their growth momentum seems to indicate a more widespread slowdown.
To what extent that fear is well-founded should become clearer when the aggregate IIP data is released next week, but there is anecdotal evidence to support the fear. In recent weeks, there have been reports of units of even large corporates having to temporarily shut down due to inventories piling up.
The government has recently disputed such interpretations based on IIP data, arguing that the index with 1993-94 as its base year is too out of sync with the current reality to reflect the actual health of the economy. However, both central excise and direct taxes have shown a downward spiral in the first six months of this fiscal, making it difficult to argue that IIP data is an aberration.
On Thursday, the finance ministry had released its direct tax figures where real estate, infrastructure, cement, automobiles, power, textiles and downstream oil companies were shown as sectors that witnessed a slowdown in growth. The advance tax collections from these sectors had the sharpest falls. Even the September figures for central excise, a pointer to the health of the domestic industry, showed a negative growth of 3.8%.
