Core sector growth slows to 0.5% in May; coal, refinery products down amid crisis, Pg1

Key Highlights:

• India's eight core industrial sectors recorded a growth of 0.5% in May 2026, marking the second lowest growth in 21 months.
• Five out of the eight sectors, namely Crude Oil, Natural Gas, Refinery Products, Coal, and Fertilizer, experienced contraction during May.
• The Refinery Products sector saw the steepest decline, contracting by 8.7%, its worst performance in three-and-a-half years.
• Only Steel, Cement, and Electricity sectors registered positive growth in May.
• The slowdown is partly attributed to the fallout from the West Asia crisis and softening international oil prices.

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Detailed Insights:

• The Index of Eight Core Industries (ICI) is compiled and released by the Office of the Economic Adviser under the Ministry of Commerce and Industry.
• These eight core industries collectively account for 40.27% of the total weight in the Index of Industrial Production (IIP), making them crucial indicators of economic health.
• The 0.5% growth in May 2026 was on a low base, as the index had contracted by 0.1% in October 2025.
• The contraction in Refinery Products is linked to the West Asia crisis, which has caused significant volatility in global energy markets and supply chains.
• The decline in Crude Oil and Natural Gas production was also influenced by higher imports and a softening of international prices.
• The Fertilizer sector contracted for the third consecutive month, although its performance improved compared to previous months.
• The Electricity sector's growth accelerated to 8.7%, benefiting from a low base effect from the previous year when it had contracted.
• The ICI serves as an important lead indicator for overall industrial performance and general economic activities in the economy.

Key Concepts Involved:

• Index of Eight Core Industries (ICI): A monthly production volume index that measures the collective and individual performance of eight key infrastructure sectors in India.
• Core Sector Growth: The growth rate of these eight fundamental industries, which serves as a barometer for the health and momentum of the industrial economy.
• Base Effect: The impact of the previous year's low or high growth rate on the current year's growth calculation, often leading to an exaggerated or understated current growth figure.
• West Asia Crisis: Refers to geopolitical tensions and conflicts in the Middle East, which can significantly disrupt global energy supply, influence oil prices, and affect international trade routes.