India's Core Sector Growth Slows To 0.5% In May, Second-Lowest In 21 Months

New Delhi, Jun 24 (KNN) India's core sector growth slowed sharply to 0.5 percent in May 2026, marking the second-lowest expansion in 21 months and highlighting emerging pressures on domestic economic activity amid global uncertainties and weakening demand conditions.
 
Eight Core Industries Hold Significant Weight 
 
According to data released by the Ministry of Commerce and Industry, the combined Index of Eight Core Industries (ICI) grew 0.5 percent year-on-year in May, down from the revised growth rate of 1.8 percent recorded in April. 
 
The cumulative growth of the core sector during April-May FY27 stood at 1.1 percent compared with the corresponding period of the previous financial year.
 
The eight core industries, coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, account for 40.27 percent of the weight in the Index of Industrial Production (IIP).
 
Among the sectors, steel production rose 5 percent year-on-year in May, while cement output increased 8.4 percent and electricity generation grew 8.7 percent, providing support to the overall index.
 
Energy-Linked Sectors Remain Under Pressure
 
However, several key sectors remained under pressure. Coal output declined 9.3 percent compared with a year earlier, marking its steepest contraction in nearly a year. 
 
Crude oil production fell 4.6 percent, extending its multi-year decline, while natural gas output contracted 4.9 percent. Petroleum refinery products registered an 8.7 percent decline, and fertiliser production slipped 0.9 percent during the month.
 
Declining Domestic Output Raises Energy Security Concerns 
 
The continued weakness in domestic crude oil and natural gas production comes despite easing global oil prices following earlier volatility linked to the West Asia crisis. 
 
Analysts noted that while India has increasingly relied on imports to meet domestic energy demand, the persistent decline in local production raises concerns over the country's energy security objectives and efforts to build strategic reserves.
 
Signs of Softer Domestic Demand Emerge
 
The slowdown in core sector output also coincides with signs of softer domestic demand. Recent Goods and Services Tax (GST) data showed a moderation in revenues from domestic transactions, suggesting that consumption activity may be losing momentum amid elevated inflation and subdued real wage growth.
 
At the same time, India's merchandise exports touched record levels in May, indicating that external demand has remained relatively resilient even as domestic economic activity shows signs of strain.
 
Uneven Recovery Clouds Growth Outlook 
 
The latest core sector data underscore the uneven nature of the recovery, with strength in sectors such as steel, cement and electricity offset by persistent weakness across energy-related industries. 
 
Economists caution that the evolving global environment and the progress of the monsoon season will remain key factors influencing growth prospects in the months ahead.
 
(KNN Bureau)