The Indian government is expanding the Core Sector Index to nine industries by including iron ore. This update, which uses a new 2022-23 base year, aims to provide a more precise reflection of national industrial activity. Investors should track this shift as it will alter the weightage and monthly reporting of the index, which recently saw growth slow to a seven-month low.
The Indian government has announced a major revision to the Index of Core Industries (ICI), adding iron ore as the ninth component of the basket. Previously, the index tracked eight key infrastructure sectors: coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity. By incorporating iron ore, the government aims to capture a more comprehensive picture of the country's industrial health.
Impact of the Revised Index
The updated series will be officially released on July 20 and will transition to a 2022-23 base year, replacing the older 2011-12 data series. This change is significant for market analysts and economists who use the core sector data as a high-frequency indicator of overall industrial output and economic momentum. Because the core sectors account for over 40% of the total weight in the Index of Industrial Production (IIP), changes to these components directly influence how the broader industrial performance is interpreted.
Technical Adjustments and Methodology
Along with the expansion, the Ministry of Commerce and Industry has introduced technical refinements to improve data accuracy. For the steel sector, the index will now move to gross production data rather than net production, which aligns the ICI more closely with the IIP’s reporting methodology. Additionally, the coal sector calculation will now focus exclusively on raw coal. By removing coal middlings and washed coal, the government intends to eliminate the risk of double-counting, as these are processed forms of raw coal already captured in the primary production figures.
Context and Investor Monitorables
This update comes at a time when the existing eight-sector index has shown signs of fatigue. In May, growth across these sectors hit a seven-month low of 0.5%, weighed down by sluggish output in coal, crude oil, and refinery products. Investors and policymakers will be monitoring the new index closely to see how the inclusion of iron ore, a critical raw material for the steel industry, balances the overall growth narrative. The shift in base year to 2022-23 is also expected to reset the growth benchmarks, potentially impacting month-on-month and year-on-year growth comparisons for the immediate future. The next important step will be the July 20 release, which will set the new standard for tracking these infrastructure-linked industries.