Core sector growth: India’s core sector grew 5 per cent in June, its best performance in five months. Growth in April-June was 3.6 per cent, against 1 per cent in the same quarter last year. The improvement came largely from iron ore and electricity. Hydrocarbon industries contracted.
The June release also introduces the Index of Core Industries with 2022-23 as its base year. It replaces the 2011-12 series and adds iron ore to the earlier basket of eight industries. The revised index covers coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, electricity and iron ore.
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These industries carry about 40 per cent of the weight in the Index of Industrial Production. The core sector index is therefore a useful, though incomplete, advance measure of industrial activity.
Core sector growth under the new series
Rebasing has altered the composition of the index. Electricity now has the largest weight, at 30.93 per cent. Refinery products follow at 22.57 per cent and steel at 17.58 per cent. Iron ore enters with a weight of 4.91 per cent.
The change is overdue. The previous series measured today’s production against the structure of the economy in 2011-12. The new series also uses gross rather than net steel production and excludes washed coal and coal middlings to avoid double counting. The weights have been derived from the new IIP series and redistributed across the nine industries.
Rebasing, however, complicates comparisons with numbers published under the old series. The government has released a back series from April 2023, but longer comparisons will require care.
Iron ore drives June core sector growth
Iron ore output rose 43.9 per cent in June, the highest increase among the nine industries. Electricity and cement each grew 9.8 per cent. Steel production increased 4.6 per cent and coal 1.4 per cent. (June 2026 core industries release)
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The iron ore increase carries a favourable base effect. It also points to demand from steel producers and infrastructure projects. Cement’s performance supports the same reading. Government capital expenditure continues to sustain demand for construction materials and electricity. Private investment has returned in parts of real estate, commercial construction and manufacturing, but it remains selective.
Cement, steel and electricity do not prove that the entire industrial economy is accelerating. They show that construction and capital works are holding up. Their demand also raises activity in transport, machinery and contract labour.
Energy production remains the weak side
Natural gas production fell 7.4 per cent in June. Refinery output declined 4.7 per cent, crude oil 4.2 per cent and fertiliser production 3.3 per cent.
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The fall in domestic oil and gas production is persistent. Ageing fields have lost output, while new discoveries have not made up the shortfall. India imports about 85 per cent of the crude oil it consumes. Lower domestic production therefore adds to import dependence rather than restraining demand.
Refinery production also weakened as export demand slowed. Fertiliser output remains tied to imported gas and overseas supplies of raw materials. Changes in gas prices or shipping routes feed into production costs and the subsidy bill. Diversifying suppliers after Russia’s invasion of Ukraine reduced dependence on individual countries, but it did not remove the exposure.
June’s numbers show two different production trends. Industries serving construction and public investment are expanding. Domestic production of oil and gas continues to fall.
Public capital spending can support the first trend for some time. It cannot substitute for private investment indefinitely, nor can it correct India’s energy dependence. The June core sector reading is encouraging, but its 5 per cent headline owes much to a 43.9 per cent jump in a sector carrying less than 5 per cent of the index.