New Delhi: India’s core infrastructure sectors slipped into contraction in March, shrinking 0.4% year-on-year, marking the weakest performance in 19 months and underscoring a broad-based loss of industrial momentum despite pockets of resilience in steel, cement and natural gas.
The downturn follows a visible deceleration trend, with growth easing to 2.3% in February from 2.8% earlier, according to data released by the Ministry of Commerce and Industry on Monday. For the full financial year 2025-26, cumulative growth slowed to 2.6%, significantly lower than 4.5% recorded in 2024-25, indicating a sustained cooling of infrastructure-led activity.
The contraction in March was driven largely by sharp declines in fertilisers, crude oil, coal and electricity. Fertiliser output registered the steepest fall, plunging 24.6% after expanding 3.4% in February, signalling both demand-side and production disruptions. Crude oil production declined 5.7% year-on-year, reinforcing structural weaknesses in domestic energy output, while coal production dropped 4% after a 2.3% rise in the previous month. Electricity generation also slipped 0.5%, reversing from earlier gains and pointing to softer underlying demand.
“Core sector growth was expectedly at a lower level, with a decline of 0.4%. The war impact was seen in fertiliser production falling, while natural gas production stepped up given import challenges. Steel and cement remained positive with support from the government. It looks like private investment is cautious in the face of the war. We can expect IIP growth of 1% to 2% more from consumer goods and partly from capital goods,” Madan Sabnavis chief economist Bank of Baroda.
Aditi Nayar, chief economist, ICRA Ltd, echoed the same sentiment, saying, “Core sector output contracted by 0.4% in March, the first time in five months, amidst a decline in production across four of the eight sectors. While an adverse base weighed on electricity generation, a shortage of inputs amidst the West Asia crisis curtailed the fertiliser output, which plunged by an unprecedented 24.6% YoY in the month."
“Besides, the growth in steel and cement output also weakened in March 2026 relative to February 2026, suggesting that construction activity slowed in the month. Given these trends, and the adverse impact of the surge in energy prices and constrained availability, ICRA expects the IIP growth to slow to ~1.0-2.0% in March 2026 as against 5.2% in February 2026,” she added.
In contrast, some sectors offered limited support. Natural gas output rose 6.4%, the fastest among the eight industries, while cement production grew 4%, though markedly slower than the 9.3% expansion seen previously, suggesting a moderation in construction activity. Steel output increased 2.2% in March, but this too reflected a slowdown from the 7.2% surge in January. Petroleum refinery products, which carry the highest weight in the index, inched up just 0.1% after contracting 1% in the prior month.
Taken together, the eight core industries — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — account for 40.27% of the Index of Industrial Production (IIP), making their performance a critical barometer of industrial health.
Despite the weak core sector print, broader industrial output had shown resilience in February. IIP growth stood at 5.2%, supported by a stronger manufacturing performance, which expanded 6% compared to 5.3% in January. Mining output also grew 3.1%, though slower than 4.3% in the previous month. However, power generation weakened to 2.3% from 5.1%, echoing the softness seen in the core sector data.
Annual trends reveal a similar divergence. During FY26, steel production rose 9.1% and cement output expanded 8.6%, highlighting continued momentum in construction-linked sectors. Electricity generation grew marginally by 0.9%. However, crude oil and natural gas output both declined 2.8% over the year, while coal production slipped 0.5%. Refinery products and fertilisers each edged down 0.1%, reflecting persistent fragility in energy and input sectors.
The March contraction raises concerns over the durability of India’s industrial recovery, particularly as weaknesses in energy and fertiliser segments begin to outweigh gains in manufacturing-linked sectors. With core industries acting as a leading indicator, the latest data suggests that sustaining industrial growth will require a sharper revival in upstream sectors that feed into the broader economy.
(Cover photo by Ricardo Gomez Angel on Unsplash)