Core industries lose momentum as coal, refinery and gas output contract

By: Team India Tracker

According to data released by the Government of India, cumulative growth across the eight core sectors during the first two months of FY2026–27 (April–May) stood at a modest 1.1 percent, indicating that industrial momentum remains weak at the start of the new fiscal year.

India’s eight core infrastructure industries registered a significant moderation in growth in May 2026, with output expanding by just 0.5 percent year-on-year, the slowest pace recorded in seven months. The latest figure represents a sharp decline from the 1.8 percent growth registered in April 2026 and remains only marginally above the 1.2 percent growth recorded in May 2025. According to data released by the Government of India, cumulative growth across the eight core sectors during the first two months of FY2026–27 (April–May) stood at a modest 1.1 percent, indicating that industrial momentum remains weak at the start of the new fiscal year.

The slowdown reflects broad-based weakness across several key energy and resource sectors that form the backbone of India’s industrial economy. Coal production contracted by 9.3 percent in May, while cumulative output during April–May declined by 9.1 percent. Domestic crude oil production continued its long-term downward trend, falling 4.6 percent in May and 4.2 percent cumulatively during the first two months of the fiscal year. 

Natural gas output also weakened, registering a 4.9 percent decline in May and a cumulative contraction of 4.5 percent. The sharpest setback came from petroleum refinery products, which account for more than a quarter of the core industries index. Refinery output fell 8.7 percent in May, contributing significantly to the overall slowdown, while cumulative production declined 4.7 percent. Fertiliser production also remained subdued, contracting 0.9 percent in May and 4.5 percent during the April–May period.

Source: Ministry of Commerce and Industry

Despite these headwinds, stronger performances in a few infrastructure-linked sectors prevented the overall index from slipping into negative territory. Steel production grew 5 percent in May and 5.2 percent cumulatively, supported by continued demand from construction, manufacturing and infrastructure projects. 

Cement output expanded by 8.4 percent during the month and 8.3 percent over the first two months of FY27, reflecting sustained activity in housing, urban development and public infrastructure works. Electricity generation emerged as the strongest-performing segment, recording growth of 8.7 percent in May and 7.1 percent cumulatively, indicating robust power demand from both industrial and domestic consumers.

The Index of Eight Core Industries is closely watched because it accounts for approximately 40 percent of the weight of the Index of Industrial Production (IIP) and serves as an important leading indicator of broader economic activity. The latest data suggests that infrastructure construction and investment-related sectors continue to underpin industrial growth, even as energy-producing industries struggle with production constraints and structural challenges. The contraction in coal, crude oil, natural gas and refinery output highlights persistent concerns regarding domestic energy supply and the capacity of the sector to keep pace with rising economic demand.

The figures also underscore the growing divergence within India’s industrial landscape. While infrastructure-oriented sectors such as steel, cement and electricity continue to benefit from government capital expenditure, urbanisation and construction activity, growth in the wider core economy remains uneven. This trend suggests that India’s industrial expansion is becoming increasingly reliant on infrastructure-led demand rather than broad-based growth across all major sectors. As a result, policymakers and investors will closely monitor future core sector data for indications of whether the current weakness is temporary or reflective of deeper structural challenges in the energy and resource segments of the economy.