India core sector performance: The eight core industries are more than monthly data points; they form the backbone of India’s industrial system, supplying the inputs that keep factories running, infrastructure expanding and exports moving. When these sectors lose momentum, the tremors run through the rest of the economy. October’s numbers deliver a warning. The Index of Core Industries remained at 162.4 — unchanged from a year earlier and the weakest performance in 14 months. This marks a sharp reversal from the revised 3.3% growth in September. The stagnation reflects a familiar pattern: construction-linked sectors showed resilience, but the energy cluster contracted sharply, neutralising the gains.
The energy segment was the principal drag. Coal output fell 8.5%, natural gas shrank 5% for the 16th consecutive month, crude oil production declined for the ninth time this year and electricity generation dropped 7.6%, ending a three-month growth streak. These declines overshadowed the strength in fertilisers, cement and refinery products, even as steel growth slowed to its weakest level in half a year. Sequentially, the index rose 1.18% over September, but this reflects a rebound from a ten-month low rather than renewed strength. Six sectors posted month-on-month gains, but electricity and steel contracted sharply.
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Over April to October FY26, the core sectors grew 2.5%, well below the 4.3% pace in the same period last year. ICRA Ratings expects overall industrial output to moderate, projecting IIP growth of 2.5–3.5% for October, down from 4% in September. Excess rainfall affected mining activity and electricity demand, while an early festive season skewed the base for steel. Yet, attributing the weakness only to weather obscures deeper structural trends that demand attention.
Global trends weigh on core sector
A crucial missing element in the monthly data is the influence of global commodity markets. India’s energy and industrial inputs are not insulated from global forces. The volatility in international coal and crude oil prices continues to influence domestic production decisions, refinery throughput and inventory cycles. LNG prices have remained elevated, complicating domestic gas economics and shrinking the incentive for producers to invest in exploration or expand production.
Meanwhile, global demand for steel has been soft, affecting India’s export competitiveness and tempering domestic producers’ appetite for aggressive capacity utilisation. The October slowdown, therefore, sits within a wider global cooling in commodities that shapes domestic supply more than the headline numbers suggest.
Power sector stress adds to growth risks
Electricity generation cannot be understood merely through demand fluctuations. State-owned distribution companies (DISCOMs) continue to face chronic financial strain, delaying payments to generating companies and reducing the cash flow required to maintain thermal capacity. Thermal plant load factors remain subdued, despite rising peak demand, because generators often prefer to curtail output rather than accumulate unpaid dues.
Renewable energy variability increases the pressure on thermal units, forcing frequent ramp-ups and shutdowns that reduce efficiency. These structural weaknesses explain a slump in electricity output more convincingly than rainfall patterns alone.
Coal India, ONGC and the energy output puzzle
Upstream institutions such as Coal India, ONGC and Oil India form the core of the country’s energy security strategy, yet coal and hydrocarbon production consistently fall short of domestic targets. Coal India’s annual goals remain high, but land acquisition delays, evacuation bottlenecks and labour constraints limit actual production.
Hydrocarbon exploration has struggled with pricing uncertainties and slow progress in opening new fields. The October contraction in coal, gas and crude becomes clearer when viewed through this institutional lens. India’s upstream production system is running below the level required to support an expanding industrial economy.
Monthly data is only half the story. Core industries often signal turning points for the broader industrial economy because they represent its essential plumbing—coal that feeds power plants, gas that fuels fertilisers and petrochemicals, and steel and cement that anchor construction. A zero-growth reading is not a statistical quirk; it indicates stress in the supply chain that feeds manufacturing and infrastructure.
Core sector weakness clouds medium-term growth
The numbers also raise questions about India’s medium-term industrial ambitions. The country wants to build a competitive base in electronics, semiconductors, renewable energy equipment, advanced materials and export-oriented manufacturing. All of these sectors depend on reliable energy supply and stable input costs. A prolonged slump in coal and natural gas risks eroding competitiveness before new factories scale up.
The fragility of India’s industrial recovery becomes clearer when one considers that rapid services growth and steady consumption have masked industrial weaknesses for much of the year. With core sectors contributing over 40% of the IIP basket, stagnation will inevitably pull growth downward if it persists.
Energy transition challenges
India is in the middle of a complex energy transition, with a target of 500 GW of non-fossil capacity by 2030. Yet execution has been uneven. Renewable generation continues to expand, but intermittency has increased the balancing burden on coal plants. Pumped hydro storage, a key requirement for absorbing renewable volatility, is progressing slowly.
Meanwhile, green hydrogen and ammonia—expected to anchor long-term energy security—are yet to achieve scale or stable demand. This transition has created a duality: coal remains indispensable even as decarbonisation pressures increase. The result is an uncertain investment climate across the energy chain and a greater risk that the October numbers reflect more than short-term volatility.
At this juncture, it would be premature to declare a crisis on the basis of one weak month. Core sector data is famously noisy, and weather disruptions often distort mining and electricity output. But the cumulative pattern in FY26 indicates that the industrial recovery remains uneven. For policymakers, investors and businesses, the message is unambiguous: headline growth may be resilient, but industrial fundamentals are fragile.
Stronger energy reforms needed
India must move beyond cyclical fixes and address structural bottlenecks. Domestic energy production needs to be strengthened through faster mining reforms, better evacuation networks, improved gas pricing mechanisms and a more efficient thermal power system.
The linkages between upstream extraction and downstream manufacturing must be modernised, with smoother logistics and more predictable supply flows. Without such measures, India’s industrial story will continue to rely on demand pulses rather than durable capacity creation.
October’s flatline should not be dismissed as a passing anomaly. As India aspires to build a more competitive industrial ecosystem, the health of its core sectors will determine how far those ambitions can go. The energy economy—not seasonal fluctuations—will shape whether India’s industrial narrative moves from promise to performance.