Core Sector Growth Slows to 0.5% in May 2026

Context:

Recently, the growth in India’s eight core industrial sectors slowed sharply to 0.5% in May 2026, marking the second-lowest level in 21 months, according to data released by the Ministry of Commerce and Industry.

About the Index of Eight Core Industries (ICI):

The Index of Eight Core Industries (ICI) measures the performance of key infrastructure-related sectors and acts as a leading indicator of overall industrial activity (IIP).

Core Sectors and Weightage in ICI

• • • Petroleum Refinery Products: 28.04%
    • Electricity: 19.85%
    • Steel: 17.92%
    • Coal: 10.33%
    • Crude Oil: 8.98%
    • Natural Gas: 6.88%
    • Cement: 5.37%
    • Fertilizers: 2.63%

These eight sectors together account for about 40.27% weight in the Index of Industrial Production (IIP).

Key highlights of the data:

• • • • India’s core sector growth slowed sharply to 0.5% in May 2026, marking the second-lowest level in the past 21 months. This is a notable decline compared to 1.2% growth in May 2025, indicating weakening industrial momentum. The reading is only marginally better than the contraction seen in October 2025 (-0.1%), reflecting continued volatility in core infrastructure-linked industries.
      • A broad-based contraction was observed in key energy-linked sectors. Crude oil (-4.6%), natural gas (-4.9%), refinery products (-8.7%), coal (-9.3%), and fertilizers (-0.9%) all recorded negative growth. The sharp decline in petroleum and coal-related output was the primary drag on overall core sector performance, with refinery products witnessing their worst contraction in over three years.
      • In contrast, only a few sectors showed positive growth. Electricity output rose by 8.7%, largely supported by a low base effect, while steel grew by 5.0%, though it touched a 13-month low growth rate. Cement production increased by 8.4%, showing marginal improvement driven by steady construction demand.

Significance of Core Sector Performance:

Economic Indicator

• • • • Core sectors are a leading indicator of industrial output (IIP)
      • Reflects demand conditions in manufacturing and infrastructure

High Weight in Economy

• • • • Together account for ~40% of IIP, making them critical for GDP momentum

Infrastructure Linkage

• • • • Steel, cement, and electricity are directly linked to construction and infrastructure growth

Policy Relevance

• • • • Helps policymakers assess industrial slowdown or recovery trends in real time

Concerns:

• • • Weakness in energy-related sectors (coal, oil, gas, refinery)
    • Persistent contraction in fertilizer sector affecting agriculture inputs
    • Risk of spillover into manufacturing and infrastructure sectors
    • Global uncertainties affecting energy supply chains

Conclusion:

The slowdown in core sector growth to 0.5% in May 2026 signals weakening industrial momentum, primarily driven by contraction in energy-linked industries. While select sectors like electricity and cement show resilience, sustained recovery will depend on stabilisation in global energy markets, domestic demand revival, and infrastructure-led growth push.