Core sector growth hits 0.5% in May 2026 on fuel slump

Core sector print slips to a seven-month low

India’s Index of Eight Core Industries (ICI) grew 0.5% year-on-year in May 2026, slowing sharply from an upwardly revised 1.8% in April. The May reading marked a seven-month low for the core sector, which tracks production across coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, cement and electricity. It was also the weakest expansion since October 2025, when the index contracted by 0.1%. The latest slowdown came as energy-linked segments fell in tandem, while steel, cement and electricity stayed in positive territory.

The eight core industries are widely tracked because they are a leading indicator for industrial activity and infrastructure momentum. The ministry noted that May data are provisional and will be revised as more information is received from source agencies. Even so, the sharp divergence between energy and non-energy segments stood out in the May release.

What changed from last year and last month

The 0.5% growth in May 2026 compares with 1.2% growth in May last year, indicating a softer base-to-base performance. It also reflects a cooling from April’s 1.8% expansion, despite that month being revised upward. In other words, the core sector did not just slow on a yearly comparison, it also lost sequential momentum relative to the preceding month’s pace.

Economists flagged the disappointment in the headline number. Madan Sabnavis, chief economist at Bank of Baroda, said core sector growth in May was “disappointing at 0.5% compared with 1.2% last year.”

Coal and refinery output led the drag

The steepest pressure points were coal and petroleum refinery products. Coal output contracted 9.3% in May, described in the data as a 10-month low. Petroleum refinery products, the heaviest-weighted segment in the index with a 28.04% share, fell 8.7% year-on-year during the month. The refinery contraction was also described as a 42-month low.

Compared with April, the stress in refinery output intensified meaningfully. Refinery products moved to an 8.7% contraction in May from a mild 0.5% contraction in April. Coal also weakened further, with the May decline worsening from an 8.8% fall in April.

Broader weakness across fuel-linked segments

The May data showed that the softness was not confined to two segments. Crude oil production contracted 4.6% and natural gas output fell 4.9% year-on-year. Fertilisers also slipped, with output contracting 0.9% in May, based on provisional government data.

This cluster of declines mattered because these segments are central inputs for transport, manufacturing, power generation and agriculture-linked demand. With multiple fuel and feedstock categories contracting simultaneously, the headline ICI number faced a strong downward pull even before considering the mixed performance in metals and power.

Resilience in steel, cement and electricity

The ministry said steel, cement and electricity recorded positive growth in May 2026. While the release did not provide the exact growth rates for these three segments in the provided data, their gains were not enough to offset the contraction across coal, crude oil, natural gas and refinery products. The composition of growth therefore remained uneven, with heavy pressure in energy-related components.

For markets and policy watchers, the split is important: strong output in steel, cement and electricity generally aligns with construction and infrastructure activity, but weaker fuel production can constrain downstream operations and supply chains.

Disruptions linked to the West Asia crisis

The slowdown was reported amid disruptions tied to the crisis in West Asia. The data narrative linked the contraction in coal and petroleum sectors to these disruptions, indicating that external shocks were a relevant part of the operating environment during the month.

Separately, the Bank of Baroda economist attributed the lower growth primarily to weaker petrochemical-linked output, noting declines in crude oil, gas and refinery products. The commentary also pointed to factors such as higher crude imports, a drop in international prices, supply-side constraints for natural gas, and lower exports of petrochemical products as contributors to the overall decline. The same commentary suggested coal output fell as companies focused on inventory optimisation and reduced production.

April to May snapshot and revisions ahead

On a cumulative basis, coal production declined 9.1% during April-May. Over the same two-month period, crude oil, natural gas, refinery products and fertilisers recorded contractions of 4.2%, 4.5%, 4.7% and 4.5%, respectively. In the Hindi-language summary included in the provided material, average core sector growth during April-May of FY2026-27 was noted at 1.1%.

The government reiterated that May numbers are provisional. The next set of core sector data for June is scheduled to be released on July 20.

Key numbers at a glance

Sector performance: May 2026 (YoY)

Why this print matters for investors

A low core sector print can influence expectations around near-term industrial momentum because the ICI covers sectors that feed into construction, manufacturing and energy availability. In May, the weak headline number was driven by broad-based declines in fuel and mining-linked components, especially refinery products and coal. Given refinery products have the largest weight in the index, a sharp contraction there can disproportionately pull down the overall growth rate.

At the same time, the confirmation of positive growth in steel, cement and electricity suggests parts of the economy linked to building activity held up better than fuel-linked production. Investors tracking cyclical sectors often look for this pattern to understand whether weakness is concentrated in energy supply chains or is spreading across the wider industrial base.

What to watch next

The May figures are provisional, and revisions could change the final picture. The June data, due on July 20, will be watched for two reasons: whether energy-linked segments continue to contract, and whether the resilience in steel, cement and electricity persists. Any improvement or further deterioration in refinery and coal output will likely have an outsized impact on the headline ICI number because of their weight and linkage to broader industrial operations.