India Core Sector Growth Slows to 2.27% in Feb 2026: Energy Crisis & GDP Impact

CORE SECTOR GROWTH TAPERS IN FEBRUARY 2026

Core sector (Infrastructure) growth for February 2026 came in at 2.27%; sharply lower than the 4.72% recorded in January and 4.66% in December 2025. It must be noted that the January core sector was upgraded by 69 bps from 4.03% to 4.72%. The fall gets much more serious because of 2 reasons. Firstly, the base effect was favourable, so actual fall in Feb-26 was much sharper than it appears. Secondly, This is the period up to 28-February, and the real supply chain constraints only began in March when the war in West Asia started. The pressure on core sector appears to be much sharper than it appears; and this has implications for GDP growth as core sector is nearly 40% of the IIP basket.

Here is a quick look at what comprises the core sector basket. It is a group of 8 infrastructure sectors; Coal Mining, Oil Extraction, Oil Refinery Products, Natural Gas, Fertilizers, Steel, Cement, and Electricity. These 8 sectors actually constitute the building blocks of the Indian economy. Energy is heavily represented in this basket. In fact, the 5 sectors representing energy; coal, crude oil, refinery products, natural gas, and electricity, together account for 74% of the core sector weightage. Robust core sector is about robust energy sector growth; and that is where the pressure is deepening due to the war.

CORE SECTOR GROWTH TRENDS – LAST ONE YEAR

The table captures breakdown of the 2.27% yoy core sector growth for February 2026 across 8 infrastructure baskets. Previous data points have been revised, appropriately.

Data Source: DPIIT (Department for Promotion of Industry and Internal Trade)

In February 2026, 5 out of 8 core sectors saw positive growth, and the pressure came largely from the hydrocarbons segment with oil exploration, refinery products, and natural gas showing negative growth. The negative growth in refinery products has a deep impact as it has a weightage of 28.1% in the core basket. Among the other heavyweight sectors; by electricity with 19.85% weight grew at just 0.46%, while steel with a weight of 17.92%, grew at a slower pace of 7.24%. With strong upgrades in December and January, there are strong hopes of an upgrade in the February 2026 core sector numbers too.

ANNUAL CORE SECTOR NUMBERS, SOME KEY TAKEAWAYS

Core sector is reported on a monthly and on an annual basis. For FY26, it is for the 11 months ending February; so that is largely representative of the full year.

The average core sector growth in the first 11 months of FY26 has come in at 2.88%. If you exclude the exceptional COVID period, this is the lowest core sector growth since FY19. If you look at the 10 years prior to FY26, the average core sector growth was 4.06%. If the exceptional de-growth of COVID year was eliminated, then the average of the remaining period was 5.20%. In comparison the 2.88% in FY26 is starkly lower.

What have been the specific items in the core sector basket that have either boosted or pushed down the growth in FY26? In case of steel and cement, the FY26 growth has been around 200-250 bps better than the 10-year average, driven by construction spending. Crude oil exploration and fertilizers are marginally lower than their 10-year averages. However, the sharp fall compared to 10-year averages was seen in coal, natural gas, refinery products, and electricity. Overall, the energy basket is putting pressure on core sector.

CORE SECTOR OUTPUT – SOME INVESTMENT SIGNALS

What should investors read from the February 2026 core sector data?

1. Steel and cement output are consistently above the monthly and yearly averages. That is reflective of substantial demand from infrastructure and housing. In a tough market, they could be the domestic trends to focus on.
2. Oil has been facing supply chain issues even before the war began in full earnest, with the freight charges and the insurance premium going up in February itself. Things have worsened in March, so the impact could be much higher in March data.
3. For India, there is a tremendous shortage of gas in March, and that is not only impacting consumption, but a spate of user industries like power, fertilizers, autos, ceramics etc. A lot will depend on how soon the gas supply chain is put back in regular shape.
4. Investors must look for the rebuilding and reconstruction dividend that will come for Indian companies once the war in West Asia is over. That could give the first big spurt to the core sector. Investors must craft their portfolio mix accordingly.

The energy dependence (74%) is influencing and that could also be the revival story!