CORE SECTOR EDGES BELOW 5% LEVEL
CORE SECTOR EDGES BELOW 5% LEVEL After 2 month of core sector growth above 5%, the core sector growth for August 2026 tapered to 4.84%. In fact, the core sector growth for July was also revised lower by 35 basis points from 5.39% to…
CORE SECTOR EDGES BELOW 5% LEVEL
After 2 month of core sector growth above 5%, the core sector growth for August 2026 tapered to 4.84%. In fact, the core sector growth for July was also revised lower by 35 basis points from 5.39% to 5.04%. For the first 5 months of FY27, the core sector growth has stayed almost flat at 4.3%. However, the real core sector challenge is in energy segment.
If one looks at some of the key components of the core sector in August 2026; coal output contracted -3.75%, crude oil contracted by -3.56%, natural gas contracted by -4.88%. Fertilizers took the biggest hit from the supply chain constraints as output dipped -12.4%, forcing the Indian economy to increasingly rely on fertilizer imports to meet the gap.
MONTH-WISE CORE SECTOR GROWTH – LAST ONE YEAR
The table captures breakdown of the 4.84% yoy core sector growth for August 2026 across 9 infrastructure baskets. Previous data points have been revised, appropriately.
| Months | Overall | Coal | Natural Gas | Crude | Refinery | Fertilizers | Steel | Cement | Power | Iron Ore |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug-25 | 6.16% | 10.81% | -2.15% | -0.71% | 3.42% | 4.55% | 15.27% | 5.38% | 4.19% | 7.94% |
| Sep-25 | 3.10% | -1.08% | -3.73% | -0.74% | -3.23% | 1.67% | 14.26% | 5.06% | 3.13% | 0.77% |
| Oct-25 | 0.82% | -8.44% | -5.20% | -0.82% | 5.32% | 7.40% | 9.48% | 5.20% | -6.95% | 8.74% |
| Nov-25 | 3.48% | 2.21% | -2.48% | -2.59% | -0.19% | 5.51% | 11.65% | 15.09% | -1.51% | 19.33% |
| Dec-25 | 5.63% | 3.72% | -4.36% | -5.11% | -0.26% | 4.12% | 11.08% | 13.96% | 6.24% | 22.29% |
| Jan-26 | 5.15% | 0.86% | -4.92% | -5.41% | 0.45% | 3.69% | 13.84% | 11.26% | 5.14% | 12.85% |
| Feb-26 | 3.21% | 1.36% | -4.96% | -4.83% | -0.39% | 3.51% | 9.87% | 9.12% | 2.29% | 8.54% |
| Mar-26 | 2.88% | -3.96% | -3.71% | -5.34% | 0.89% | -24.56% | 9.63% | 4.71% | 0.84% | 33.28% |
| Apr-26 | 2.67% | -9.02% | -4.20% | -3.21% | -0.20% | -8.54% | 4.68% | 8.28% | 5.49% | 12.47% |
| May-26 | 3.18% | -9.48% | -4.96% | -4.20% | -8.15% | -0.98% | 5.12% | 8.43% | 11.19% | 18.99% |
| Jun-26 | 5.97% | 1.41% | -4.81% | -4.24% | -3.97% | -3.31% | 5.56% | 9.93% | 11.36% | 44.51% |
| Jul-26 | 5.04% | 7.57% | -2.97% | -5.34% | 3.05% | -8.05% | 1.90% | 12.70% | 8.35% | 29.54% |
| Aug-26 | 4.84% | -3.75% | -4.88% | -3.56% | 2.55% | -12.36% | 3.38% | 12.50% | 11.64% | 5.49% |
| Data Source: DPIIT (Department for Promotion of Industry and Internal Trade) |
Here are some key takeaways from the core sector data.
Energy sector continues to be under pressure. Refinery products have got a boost from pent-up demand across Europe, so that is still positive and GRMs are still attractive. That has held up the core sector growth due to its substantial weightage in the basket.
Crude and natural gas output have been in contraction mode for more than 12 months in succession. That is not a good sign and it is indicative of structural issues. Many of the recent initiatives are more likely to pay off in the long run.
Fertilizers contracted sharply in August due to supply chain constraints imposed by the Gulf war. The blockade of Hormuz and Bab-al-Mandeb are a major overhang on input supplies. However, urea prices falling sharply, should limit the extent of impact.
Coal output again dipped into contraction mode, and this can be attributed to a slowing of mine output by Coal India. In 3 of the last 5 months, the coal output has been in contraction mode. This is despite robust demand from the thermal power segment.
While steel output growth was subdued at 3.38%; cement output and power output saw double-digit growth in August. Infrastructure and construction demand has been one of the key drivers of core sector output in the month of August 2026.
Most of the pressure is coming from the energy sectors like coal, crude, and natural gas. Output has been constrained due to structural or seasonal factors.
ANNUAL CORE SECTOR GROWTH: FLAT IN FY27
For the 5 months ended August 2026, the annualized core sector growth has remained steady at around 4.3%.
| Fiscal Years | Overall (%) | Coal (%) | Crude (%) | Natural Gas (%) | Refinery (%) | Fertilizers (%) | Steel (%) | Cement (%) | Electricity (%) | Iron Ore (%) |
|---|---|---|---|---|---|---|---|---|---|---|
| 2024-25(Apr-Mar) | 4.3 | 5.0 | -0.3 | -2.2 | 2.8 | 2.9 | 7.3 | 6.4 | 5.2 | 4.6 |
| 2025-26(Apr-Mar) | 3.0 | -0.7 | -3.6 | -2.7 | 0.4 | -0.1 | 11.6 | 8.5 | 1.0 | 8.0 |
| 2025-26(Apr-Aug) | 2.4 | -0.7 | -2.7 | -1.4 | 0.4 | -0.9 | 11.8 | 7.6 | 0.7 | -3.4 |
| 2026-27(Apr-Aug) | 4.3 | -3.2 | -4.4 | -4.1 | -1.4 | -6.7 | 4.1 | 10.3 | 9.6 | 21.8 |
The FY27 (5 months) core sector growth of 4.3% is meaningfully better than the first 5 months of FY26 at 2.4%. The positive traction in FY27 has largely come from electricity, iron ore, and the cement sector. Steel, which was a major contributor till March, has seen the output growth being impacted by a high base since April 2026.
How does the latest core sector number compare with FY26 and FY25. While the 4 months core sector growth at 4.3% is at par with FY25, it is better than the 3.0% recorded in FY26. However, the ability to sustain the 4.3% annualized growth and improve upon it, will largely depend on how the war pans out and how the supply chain constraints are handled.
WILL THE NEW SERIES HELP IMPROVE THE CORE SECTOR?
If one analyses the weightage of the new series, there are 3 pockets that emerge. Crude, refinery products, and natural gas have a combined weight of 33.84%. Coal and Electricity have a combined weightage of 36.53%, while industrial commodities like iron ore, steel, and cement have a combined weight of 26.90%. These 3 baskets will continue to be the major drivers of the core sector. As of now, it is only the infrastructure segment that is still showing robust demand. That has to broaden considerably!
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