Whalesbook
Infrastructure Drives Modest Growth
India's eight core industries saw a 1.7% expansion in April 2026, an improvement from the revised 1.2% growth in March and the 1% recorded in April of the previous year. Key drivers for this increase were strong performances in steel, which grew by 6.2%, cement at 9.4%, and electricity generation at 4.1%. These figures reflect ongoing construction and infrastructure development, boosted by government projects and seasonal energy demand.
For the fiscal year 2025-26, the cumulative growth for the core sector reached 2.7%. This moderate expansion is expected to influence the broader Index of Industrial Production (IIP) for May, which previously showed a 4.1% year-on-year growth in March 2026, slowing from 5.2% in February.
Energy and Fertilizer Sectors Lag
Despite positive gains, five of the eight core sectors contracted, highlighting underlying economic pressures. Coal production fell by 8.7%, crude oil by 3.9%, and natural gas by 4.3%. Petroleum refinery products experienced a slight decrease of 0.5%. The fertilizer sector remained weak, contracting by 8.6%, though this was an improvement from a 24.6% decline in March.
These persistent declines in energy and fertilizer production are linked to global factors, including geopolitical tensions in the Middle East impacting supply chains and prices. India's efforts to secure fertilizer supplies at higher costs in May 2026 underscore these global constraints.
The United Nations has revised India's GDP growth forecast for 2026 downward to 6.4% from 6.6%, citing global uncertainties and elevated energy import costs. Analysts estimate that a $10 per barrel increase in crude oil prices could reduce India's GDP growth by 44 basis points.
Risks and Future Projections
The mixed growth pattern presents economic risks. While construction and electricity sectors are performing well, the contraction in essential energy inputs and fertilizers signals vulnerabilities in India's industrial base. Reliance on imported fertilizers, subject to global price volatility, poses a risk to agricultural output.
The core sector's cumulative growth of 2.7% for fiscal year 2025-26 is notably lower than rates seen in late 2025 and early 2026, which exceeded 4%.
Analysts anticipate continued core sector recovery, with forecasts around 3% for May 2026, possibly supported by improved fertilizer production. The IIP growth for May is projected to be moderate. The United Nations forecasts India's GDP to grow by 6.4% in 2026 and 6.6% in 2027, reflecting resilience in domestic demand and service exports. India Ratings & Research projects a GDP growth of 6.7% for FY27, identifying geopolitical developments, inflation, and potential El Nino impacts on agriculture as key challenges.