India's eight core industries expanded by a modest 0.5% year-on-year in May 2026, reflecting a sharp slowdown in the country's industrial backbone as weakness across energy-related sectors offset strong gains in construction and infrastructure-linked industries. 

The latest data released by the Ministry of Commerce & Industry shows that while steel, cement and electricity continued to register healthy growth, declines in coal, crude oil, natural gas, refinery products and fertilizers weighed heavily on overall performance. 

The Index of Eight Core Industries (ICI), which accounts for 40.27% of the weight in India's Index of Industrial Production (IIP), serves as an important barometer of industrial activity and economic momentum. 

Energy sectors drag growth 

The biggest drag on May's performance came from energy-related industries, several of which reported significant year-on-year declines. 

Coal production fell 9.3%, crude oil output declined 4.6%, and natural gas production dropped 4.9%. Petroleum refinery products, the largest component of the core sector basket with a weight of 28.04%, contracted by 8.7%, amplifying the overall slowdown. Fertilizer production also slipped by 0.9%. 

The broad-based weakness in fossil fuel production comes at a time when India continues to grapple with declining domestic hydrocarbon output and rising energy demand. The contraction in refinery products is particularly noteworthy given the sector's dominant share in the index. 

Infrastructure and construction remain bright spots 

Despite the energy-sector weakness, infrastructure-linked industries continued to display resilience. 

Steel production grew 5% year-on-year in May, while cement output surged 8.4%. Electricity generation also rose a robust 8.7%, indicating sustained demand from industry, infrastructure projects and households. 

The strong performance of steel and cement — two key indicators of construction activity — suggests that government-led infrastructure spending and ongoing real estate activity continue to support industrial demand. 

For the first two months of FY27, steel output has grown 5.2% while cement production has increased 8.3%, underscoring the strength of construction-related sectors despite broader industrial headwinds. Electricity generation during the period rose 7.1%. 

Growth moderates after April 

The May reading marks a slowdown from April's final growth rate of 1.8%. However, cumulative growth for April-May FY27 stands at 1.1%, matching the pace recorded during the corresponding period a year ago. 

The data points to an increasingly uneven industrial recovery, where sectors tied to infrastructure creation continue to outperform traditional energy industries. 

The latest numbers highlight a structural shift underway in India's industrial landscape. On one side are traditional resource-based sectors such as coal, crude oil and natural gas, which continue to face production challenges. On the other are steel, cement and electricity, which are benefiting from public capital expenditure, urbanisation and manufacturing investments.

Published on: Jun 22, 2026 5:51 PM IST