Core sector output grows 5.4% in July despite slowdown in iron ore

Production growth across nine key infrastructure sectors accelerated to 5.4% in July, supported by higher output of coal, refinery products, cement, electricity, and iron ore, according to official data released on Thursday. 

The growth of the core sectors stood at 3.2% in July 2025. However, the pace of expansion moderated from 6% in June 2026. 

Core sector data gets new base year 

The government has been releasing core sector data with a revised base year of 2022-23 since June, replacing the earlier 2011-12 base. The revised index also includes iron ore, taking the number of core industries to nine. 

During the first four months of 2026-27, output across the nine core sectors grew 4.3%, sharply higher than the 1.5% expansion recorded during the corresponding period of the previous financial year. 

Electricity growth slows, but remains key driver 

Electricity, which has the highest weight of 30.9% in the revised index, recorded growth of 9% in July, slowing from 11.4% in June. 

Despite the moderation, higher electricity generation remained an important contributor to overall core sector growth, given the sector’s substantial weight in the index. 

Iron ore growth remains strong but momentum eases 

Iron ore, which carries a 4.9% weight in the index, continued to register strong growth but saw a major moderation in momentum. Output increased 29.5% in July, compared with a 44.5% expansion in June. The slowdown in iron ore production was the biggest drag on the headline growth rate among the sectors that remained in positive territory. 

Six of nine sectors register growth 

Six of the nine sectors recorded year-on-year growth in July. Iron ore, electricity, cement, steel, refinery products, and coal expanded during the month while crude oil, natural gas and fertilisers registered contractions. 

Refinery products showed signs of recovery after three consecutive months of contraction. Output rose 2.7% in July, reversing a 4% decline in June. 

Energy and fertiliser output remain weak 

Coal production also contributed to the improvement in overall core sector growth while cement and steel output continued to expand, providing support to construction and manufacturing activity. 

On the other hand, declines in crude oil, natural gas and fertiliser production remained a drag on the sector. The performance of energy-related industries is closely watched because fluctuations in domestic production can influence import dependence and input costs across the broader economy. 

Aditi Nayar, Chief Economist, ICRA, said, "The year-on-year (YoY) growth in core output eased slightly to 5.4% in July 2026 from the upward revised 6.0% in June 2026, amid a deterioration in the performance of five of the nine sectors between these months. The growth in iron ore output moderated sharply to 29.5% in July 2026 from 44.5% in June 2026, owing to an unfavourable base, while remaining quite strong. This alone exerted a downward pressure to the tune of 95 bps on the core output print in July relative to the previous month. Besides, electricity generation and steel output also witnessed a slower growth in July 2026 vis-à-vis June 2026, while fertiliser and crude oil saw a steeper contraction. Fertiliser output has contracted for the fifth consecutive month, reflecting the impact of the West Asia conflict. Given the trends in core output, we expect the IIP growth to moderate to 6.0-6.5% in July 2026 from 7.3% in June 2026."