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| India’s core sector momentum stalled in October 2025, driven by energy sector contractions despite gains in steel, cement, and fertilisers.(Representing AI image) |
India’s Core Sector Momentum Stalls: October Output at 14‑Month Low — What’s Really Going On?
- Dr.Sanjaykumar pawar
Table of Contents
- Introduction
- Understanding India’s Core Sector & Why It Matters
- October 2025 Snapshot: Key Numbers
- Dissecting the Energy Slump
- Construction & Infrastructure: Gains That Didn’t Help Enough
- What’s Behind the Weakness? Structural & Cyclical Factors
- Economic Implications & Broader Risks
- Policy Levers & What Can Be Done
- Looking Ahead: Possible Scenarios
- Conclusion
- FAQs
- References
1. Introduction
India’s economic narrative is frequently painted with broad strokes of resilience — strong private consumption, infrastructure investments, and a stable manufacturing outlook. But the devil often lies in the details. The latest data on India’s core sector — which includes industries like coal, electricity, cement, steel, and more — paints a far less rosy picture. In October 2025, core sector output stagnated, recording zero year-on-year growth, its weakest performance in 14 months.
This isn’t just a statistical blip. The slowdown was driven by sharp contractions in energy-related sectors, including coal, natural gas, and electricity — and these declines neutralized the gains seen in steel, cement, fertilizer, and refinery products. The India Index of Eight Core Industries (ICI) — a major component of overall industrial production — stood at 162.4 in October, unchanged from October 2024.
In this blog, we take a deep dive into what’s causing this slowdown, its potential impact, and what policymakers and industry players might do next.
2. Understanding India’s Core Sector & Why It Matters
The Index of Core Industries (ICI) tracks eight key sectors: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity. Collectively, these contribute roughly 40% of India’s industrial production, making them a bellwether for economic health.
- Coal, crude oil, natural gas & electricity: These are energy inputs that power other industries.
- Refinery products & fertilisers: Key intermediates in industrial and agricultural production.
- Steel & cement: Core to construction and infrastructure.
A downturn here doesn’t just slow these sectors — it ripples across the entire economy, affecting manufacturing, construction, logistics, and even consumer demand.
3. October 2025 Snapshot: Key Numbers
Let’s break down what happened in October, based on the latest provisional data:
| Sector | YoY Growth (Oct 2025) | Notes |
|---|---|---|
| ICI (Overall) | 0.0% | Flat year-on-year, weakest in 14 months. |
| Coal | –8.5% | The largest weight in ICI, this decline had major drag. |
| Crude Oil | –1.2% | Contracted for the second consecutive month. |
| Natural Gas | –5.0% | Persistent weakness. |
| Electricity | –7.6% | Big drop, reversing recent growth. |
| Refinery Products | +4.6% | One of the few bright spots. |
| Fertiliser | +7.4% | Strong recovery; possibly linked to pre-rabi stocking. |
| Steel | +6.7% | Positive but decelerated sharply from September. |
| Cement | +5.3% | Continued steady growth. |
Cumulatively for April–October 2025–26, the ICI grew by 2.5%, down from 4.3% in the same period last year.
4. Dissecting the Energy Slump
The major culprit behind the stall in core sector momentum was clearly the energy sub-sectors:
- Coal: An 8.5% year-on-year decline is significant. Since coal carries the biggest weight in ICI, this drop had an outsized effect.
- Electricity: A fall of 7.6% is alarming, especially because recent months had seen electricity growth.
- Natural Gas: A 5% drop — sustaining its contraction streak.
- Crude Oil: A 1.2% decline, modest compared to coal and gas, but still noteworthy.
Why the energy slump? Several factors are likely at play:
- Excess rainfall: Analysts (such as ICRA’s Aditi Nayar) suggest abnormal rainfall might have dampened mining activity and reduced power demand.
- Reduced industrial demand: With core sector stagnating, the same industries that draw on energy (manufacturing, cement, steel) are likely consuming less, generating a feedback loop.
- Thermal power crunch: Reuters reports show sharp decline in coal-fired generation in October.
5. Construction & Infrastructure: Gains That Didn’t Help Enough
Though the energy sector dragged overall core sector output, not all was bleak. Several non-energy core industries showed encouraging growth:
- Fertiliser: +7.4% YoY. This growth likely reflects pre-rabi agricultural stocking.
- Steel: +6.7%. Construction and infrastructure demand continues to support steel, though this is a slowdown compared to very high growth rates in earlier months.
- Cement: +5.3%. Cement remains robust, riding the wave of infrastructure demand.
- Refinery Products: +4.6%. A rebound after prior contraction.
Despite these pockets of strength, they weren’t sufficient to offset the drag from energy. This shows the asymmetric nature of risk: even strong construction-linked output couldn’t prop up the core index when energy collapsed.
6. What’s Behind the Weakness? Structural & Cyclical Factors
Why has this happened now? Let’s look at possible drivers:
-
Weather-Shocked Energy Demand
- Unusually heavy rainfall across parts of India in October likely curbed both mining and industrial activity.
- Less power consumption — especially from industrial users — as rainfall reduces cooling demand.
-
Base Effects & Statistical Drift
- The year-on-year comparison may be less favorable due to a higher base in October 2024.
- But base effect alone doesn’t explain the magnitude of fall in coal and electricity.
-
Broader Industrial Slowdown
- Core sector output is closely tied to industrial production; weakness in energy may feed into lower manufacturing and construction output.
- External demand pressures: Rising tariffs or global demand headwinds could be dampening export-driven industrial gains.
-
Policy & Supply Constraints
- Coal supply issues: logistical bottlenecks, regulatory constraints, or mining inefficiencies could be limiting coal production.
- Energy transition pressures: As India pushes for more renewables, conventional energy sectors may face underinvestment or shifting economics.
-
Festive & Seasonal Effects
- Early onset of festivals could have skewed consumption patterns, affecting industrial production cycles. Commentators like Aditi Nayar have pointed out this dynamic.
7. Economic Implications & Broader Risks
The stall in core sector momentum has several important implications:
-
Industrial Production Risk
- Since the ICI accounts for over 40% of IIP (Index of Industrial Production), sustained weakness can drag down the broader industrial growth rate.
- Analysts (e.g., ICRA) project IIP growth may moderate to ≈ 2.5–3.5% for October, down from ~4% in September.
-
Investment Slowdown
- Lower output in energy sectors may deter fresh CAPEX in power, mining, and related industries.
- Infrastructure players may scale back if power supply is inconsistent or costly.
-
Fiscal & Inflation Risks
- Slower core activity could dampen tax revenues (corporate and excise) over time.
- On the inflation front, energy sector stress could push input costs up (if supply tightens), though weaker demand might counter this.
-
Employment Impact
- Energy, mining, steel, and construction are large employers. Persistent underperformance can have labor-market repercussions.
-
Credibility of Reforms
- If this slowdown becomes persistent, it could raise questions about the efficacy of ongoing structural reforms and the ability of policymakers to sustain industrial growth momentum.
8. Policy Levers & What Can Be Done
Given the risk, what can policymakers and businesses do to respond effectively?
-
Stimulus for Energy Production
- Coal: Address supply chain constraints, incentivize mining, and invest in domestic capacity.
- Electricity: Encourage stable power demand via industrial incentives, or explore capacity augmentation.
-
Diversify & Transition
- Accelerate renewable energy investments to reduce dependence on coal.
- Promote cleaner fuel alternatives for industries to reduce pressure on natural gas and crude.
-
Demand Support
- Infrastructure push: Continue to fund public infrastructure projects.
- Construction incentives: Tax breaks or faster approvals could boost steel and cement demand.
-
Weather Resilience Planning
- Invest in adaptive infrastructure (e.g., better drainage, flood-resilient mines) to mitigate the impact of excessive rainfall.
-
Monitor & Adjust Fiscal Policy
- Use growth feedback to calibrate fiscal incentives or relief measures.
- Strengthen inter-ministry coordination (commerce, energy, finance) for policy alignment.
-
Data & Transparency
- Improve real-time monitoring of core sector output.
- Publish granular monthly data to help analysts, businesses, and investors make timely decisions.
9. Looking Ahead: Possible Scenarios
Here are three plausible scenarios for how this could evolve:
-
Optimistic Scenario — Recovery
- Rainfall normalizes → energy demand rebounds.
- Policy stimulus in energy and infrastructure kicks in.
- Core sector growth recovers to 3–4%+ by Q1 or Q2 of FY26.
-
Baseline Scenario — Subdued but Stable
- Modest energy recovery, but not enough to fully offset drag.
- Core sector growth remains in the 1–2% range for a few months.
- Industrial growth continues, but cautiously.
-
Downside Risk — Prolonged Slump
- Poor monsoon or weather-driven disruption continues.
- Energy supply constraints or global demand shock.
- Core sector contracts, dragging down IIP and GDP growth.
10. Conclusion
The stagnation of India’s core sector in October 2025 serves as a sobering reminder: beneath strong macro headlines, underlying structural risks persist. The energy sector — once the engine of growth — has momentarily faltered, and even robust performance in steel, cement, and fertilisers hasn’t been enough to compensate.
Policy response will matter. A combination of short-term stabilization measures, long-term investment in energy infrastructure, and demand-side stimulus could help India regain its core sector footing. But the window is narrow: if the slowdown deepens or becomes protracted, the ripple effects on industrial production, investment, and employment could be significant.
For businesses, investors, and policymakers, this is not just a signal to watch — it’s a call to act.
11. Frequently Asked Questions (FAQs)
Q1: What exactly is the Index of Core Industries (ICI)?
A: The ICI tracks eight major infrastructure sectors in India — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity. These sectors together make up about 40% of India’s industrial production.
Q2: Why is a flat reading (0% growth) so concerning?
A: Because these core industries are foundational. Energy sector contraction, which has large weight, drags down the index significantly. Plus, since ICI contributes heavily to IIP, weak core sector growth can dampen broader industrial momentum.
Q3: What caused the energy sector to contract so sharply in October?
A: Several reasons: unusually heavy rainfall possibly dampening mining and power demand, reduced industrial activity, and lower utilization of thermal (coal-based) power plants.
Q4: Can growth in other core sectors compensate for the energy slump?
A: Partially. Fertilisers, steel, cement, and refinery products showed year-on-year growth (+7.4%, +6.7%, +5.3%, +4.6% respectively) in October. But because energy sectors carry high weight and influence, these gains were not enough to offset the decline.
Q5: What are the risks if this slowdown continues?
A: Risks include a prolonged industrial slowdown, weakening of investment, lower tax revenues, job losses especially in infrastructure and mining, and possible erosion of investor confidence.
Q6: What can policymakers do to address this?
A: They can boost energy production, support renewables, stimulate infrastructure investments, provide demand-side incentives, build weather resilience, and ensure better data transparency to guide decisions.
12. References
- Business Standard: India’s core sector momentum stalled…
- LiveMint: Core sector output flat … sharpest slowdown in 14 months
- Moneycontrol: Core sector output stalls in October …
- Economic Times / IIP weight discussion
- NewsonAir: India’s Core Sector Output Stagnates in October
- ETManufacturing: Eight core industries index flat …
- Financial Express: Core sector growth flat in October … weak …
- Reuters / Grid‑India data on power decline
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