An Indian factory worker in a file photo. Image: Twitter

India’s infrastructure sector suffered a setback in February, raising questions about its recovery from the Covid-19 induced slowdown.

According to provisional government data, the output of eight core infrastructure sectors contracted 4.6% in February on a year-on-year basis. This is the sharpest contraction in six months.

The Commerce and Industry ministry stated that the combined index of eight core industries stood at 127.8 in February 2021, which is 4.6% less when compared with the February 2020 index. In January this year, industrial production contracted by 1.6%, after registering growth of 1% in December 2020.

All the sectors recorded negative growth in February and refinery products suffered the steepest decline (10.9%), followed by cement (5.5%), coal (4.4%), fertilizers (3.7%), crude oil (3.2%), steel (1.8%) and electricity production (0.2%).

The sharp contraction in refinery products can be attributed to the recent rise in fuel costs and a fall in consumption. According to Petroleum Ministry data, the consumption of fuel fell 4.9% to 17.2 million tons year-on-year in February, while on a monthly basis it slipped by 4.6%. In January, India registered its first month-on-month decline in five months.

From April 2020 to February 2021, the eight sectors faced a contraction of 8.3%, as against growth of 1.3% in the same period during the preceding fiscal year. On March 25 last year, India imposed a countrywide lockdown to contain the spread of coronavirus.

The move crippled the economy and pushed India into a technical recession with gross domestic product contracting for two successive quarters. However, in the October-December quarter, there was marginal growth of 0.4%, but the country’s economic woes are far from over.

The National Statistics Office warned the economy could slip back into contraction in the fourth quarter as a loss of momentum of the economic recovery as well as subsidy payouts in the current quarter could compress gross domestic product numbers. It expects a contraction of 1.1% in the fourth quarter.

For the current fiscal year, the Indian economy is projected to face its largest contraction ever and the National Statistics Office has further lowered its earlier estimates. It now expects the Indian economy to contract by 8% in 2020-21, as against an earlier estimate of a 7.7% recovery in the October-December quarter.

Meanwhile, the country is facing a second wave of the Covid-19 pandemic with daily new cases surging to more than 60,000, something not seen since October last year.

The discovery of new strains of the virus, which is reportedly more transmissible, have raised concerns among health experts. However, they are hopeful the situation will improve once the vaccination program is intensified.