scorecardresearchIndia's industrial activity picks pace, fiscal deficit widens

India's industrial activity picks pace, fiscal deficit widens

Updated: 01 Apr 2022, 08:46 AM IST
TL;DR.

  • Government data showed a pick-up in industrial activity, with the eight core infrastructure sectors growing 5.8 percent in February, the fastest in four months.

The eight core industries hold 40.27 percent weight in the Index of Industrial Production (IIP).

The eight core industries hold 40.27 percent weight in the Index of Industrial Production (IIP).

India’s fiscal deficit widened by 40 percent in February from the preceding month as the Centre shared an unprecedented 2.42 trillion worth of taxes with states, buoyed by higher revenue collections, said a Mint report.

The gap between the Centre’s revenue and expenditure touched 82.7 percent of the full year’s estimates in the 11 months to February. This indicates the government may be on course to meet the revised fiscal deficit target of 6.9 percent of gross domestic product (GDP) for the financial year 2022 (FY22), the report added.

"The government’s budgeted fiscal deficit of 6.4 percent of GDP for FY23 is likely to be adversely affected on account of potential excise duty cuts, high fertiliser and food subsidies, and compressed growth in direct taxes given squeezed corporates’ profit margins. However, modest nominal GDP growth and tax buoyancy assumptions, and the spillover of the LIC IPO to FY2023 would provide some cushion," said Aditi Nayar, Chief Economist, ICRA.

"On balance, we currently expect a modest overshoot of the government's fiscal deficit by around 0.5 trillion in FY23, in an admittedly evolving situation. Regardless, with a higher nominal GDP in FY23, the fiscal deficit may remain similar to the budgeted target of 6.4 percent of GDP," said Nayar.

Meanwhile, government data showed a pick-up in industrial activity, with the eight core infrastructure sectors growing 5.8 percent in February, the fastest in four months.

The sectors—coal, crude, natural gas, refinery products, fertilizers, cement, steel, and electricity—expanded by 5.8 percent in February from 4 percent in the previous month, data released by the ministry of commerce and industry showed on March 31.

The eight core industries hold 40.27 percent weight in the Index of Industrial Production (IIP).

The production of petroleum refinery products, the sector with the highest weightage (28.04 percent) in the index, increased by 8.8 percent. Natural gas and coal output grew by 12.5 percent and 6.6 percent, respectively. Cement output growth slowed to 5 percent in February from 14.3 percent in the previous month. Steel and electricity output grew by 5.7 percent and 4 percent, respectively, the Mint report said.

"With a pickup in growth of core sector output, higher daily average generation of GST e-way bills and continuing healthy performance of merchandise exports amidst a deeper contraction of auto production, we expect the IIP growth to print sub-2.5 percent in February 2022, lagging the core sector rise," said Nayar.

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First Published: 01 Apr 2022, 08:44 AM IST