Whalesbook
Cement and Steel Drive Core Sector Growth
India's core infrastructure sectors expanded by 1.7% in April 2026, the highest growth seen in two months. This positive momentum was significantly boosted by strong performances in the cement and steel industries, which recorded production increases of 9.4% and 6.2%, respectively. Electricity generation also contributed to the overall rise, with output growing by 4.1%. These gains are important for industrial activity, as the core sectors make up over 40% of the Index of Industrial Production (IIP).
Uneven Recovery Masks Sectoral Declines
Despite the overall growth, a closer look at the eight core sectors reveals an uneven economic recovery. Five key sectors experienced production declines: coal output fell by 8.7%, crude oil by 3.9%, natural gas by 4.3%, refinery products by 0.5%, and fertilizers by 8.6%. This broad contraction in essential energy and commodity areas highlights persistent economic pressures. Analysts, such as Rahul Agrawal, Senior Economist at ICRA Ltd, suggest that the ongoing West Asia crisis has contributed to this sector-specific weakness, impacting economic activity and creating global energy supply uncertainty.
IIP Growth Expected, But Broader Economy Faces Challenges
Economists anticipate that the April core sector performance will support the upcoming Index of Industrial Production (IIP) growth, with India Ratings & Research forecasting around 5%. India Ratings & Research also predicts continued core sector recovery, projecting about 3% growth for May 2026, partly due to a low base effect and expected improvements in fertilizer output. However, ICRA's Rahul Agrawal noted that with five out of eight sectors contracting, the overall economic picture remains challenging, with the West Asia crisis likely to continue affecting economic activity.
Geopolitical Risks and Sectoral Imbalances Cloud Outlook
External factors are increasingly shaping India's economic outlook. Geopolitical tensions in West Asia have led to downward revisions in GDP growth forecasts. India Ratings & Research now expects India's GDP to grow at 6.7% in FY27, down from 7.6% in FY26, citing risks from high crude prices, geopolitical instability, and a potential El Nino impact. ICRA has lowered its FY27 GDP growth forecast to 6.2% due to rising crude oil prices linked to the West Asia crisis. Crisil warns that the prolonged conflict in West Asia is pressuring the economy, with higher energy prices, trade disruptions, and supply chain issues expected to slow growth and increase inflation. The UN Department of Economic and Social Affairs (UN DESA) revised India's 2026 growth estimate down to 6.4%, stating that the West Asia crisis fuels inflation and weakens growth prospects for energy-importing nations. India's reliance on crude oil imports makes it particularly vulnerable to sustained fuel price increases. For the full fiscal year 2025-26, the cumulative growth of the eight core industries was 2.7%.
Mixed Signals for Future Growth
While the core sector's April performance offers a positive signal for industrial activity, the significant contractions in energy and commodity sectors, combined with escalating geopolitical risks, present considerable challenges. Forecasts from India Ratings & Research and ICRA indicate a downward revision in growth expectations for the upcoming fiscal year, highlighting the Indian economy's sensitivity to global energy prices and regional stability.