Core sector’s growth dipped to 7 months low of 0.5% in May

With five sub sectors recording de growth, growth of eight core industries slipped to 0.5 per cent in May as against 1.8 per cent of April, the government reported on Monday. This is lowest in seven months. Experts feel this will have impact on overall industrial growth print, data of which will be out on May 29.

The combined Index of Eight Core Industries (ICI) measures the combined and individual production performance of eight core industries viz. coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity. The eight core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).

During the month under consideration, the production of steel, cement, and electricity recorded growth while coal, crude oil, natural gas, refinery products, fertilizers was in negative territory, data showed.

Madan Sabnavis, Chief Economist at Bank of Baroda feels the lower growth number on low base can be attributed more to the decline in production from the petro based sector. Crude oil, natural gas, and refinery products all registered decline in production. This can be attributed more to higher import of crude and softening of prices in international market. In case of natural gas, with supply chains being addressed, domestic production tended to fall. Lower exports of petro products also contributed to decline in production.

Coal registered negative growth as companies focussed on managing inventory in a more efficient manner and cut down on production. Fertilizers production was down due to pressure on input supplies (gas) even while imports increased. Steel and cement continued to grow at a steady rate mainly due to higher infra-activity in the areas of roads and housing besides railways. Electricity production grew 8.7 due to higher demand coming from households due to extreme heat conditions. Renewables contributed to this growth as coal-based generation took a secondary role.

“We may expect IIP growth of 1-1.5 per cent for May,” Sabnavis said.

According to Rahul Agrawal, Principal Economist at ICRA, refinery products, witnessed the sharpest decline in 42 months, partly reflecting the fallout of the West Asia crisis. The growth in electricity generation improved to a 19-month high of 8.7 per cent in the month, aided by high temperatures as well as a favourable base; this ensured that overall core output growth remained in the positive territory in the month. “Given the tepid performance of the core sector in May 2026, IIP growth is likely to weaken to 2-3 per cent in the month from 4.9 per cent in April 2026m” he said.