Mumbai | June 21, 2025

India’s core infrastructure sectors reported a sharp deceleration in growth, registering a modest 0.7% increase in May 2025—the lowest in the past nine months. The latest data, released by the Ministry of Commerce and Industry on Friday, highlights a continued slowdown in the country’s industrial output, with significant declines in key sectors like electricity, natural gas, and fertilisers.

This marks a steep drop from the 6.9% growth recorded in May 2024, and even a dip from the revised April 2025 figure of 1.0%. The last time such sluggish performance was witnessed was in August 2024, when the core sector had contracted by 1.5%.

Mixed Sectoral Performance

Among the eight core industries—coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity—only cement, steel, coal, and refinery products showed positive output in May.

• Cement production surged by 9.2%, supported by strong infrastructure demand.

• Steel output rose 6.7%, compared to 4.4% in April.

• Coal production registered a 2.8% increase, though slightly below April’s 3.5%.

• Refinery products posted a mild 1.1% growth, rebounding from a contraction in April.

Conversely, four critical sectors recorded contraction:

• Electricity generation declined by 5.8%, possibly impacted by early monsoon rains and lower power demand.

• Natural gas output dropped 3.6%, continuing its downward trend.

• Fertiliser production contracted sharply by 5.9%, worse than the 4.2% fall in April.

• Crude oil production also declined by 1.8%, marginally better than April’s 2.8% contraction.

April–May Cumulative Performance

In the first two months of FY26 (April–May 2025), India’s core sector growth remained subdued, with a combined expansion of only 0.8%. This reflects a significant slowdown compared to the 6.9% growth registered during the same period in FY25.

The cumulative performance reveals a mixed trend:

• Cement led the gains with a robust 7.8% rise, indicating strong construction demand.

• Steel followed with 5.5% growth, buoyed by infrastructure momentum.

• Coal output increased by 3.1%, supporting thermal power and industrial usage.

• On the downside, Refinery products declined 1.7%, reflecting weak demand or operational slowdowns.

• Crude oil and Natural gas both slipped, down 2.2% and 2.3%, respectively.

• Fertilizer production contracted significantly by 5.1%, possibly due to supply disruptions or inventory overhang.

• Electricity generation also dropped 2.2%, likely affected by early monsoon and lower consumption.

Expert Insight

Rahul Agrawal, Senior Economist at ICRA Ltd, attributed the weak performance in part to excess rainfall and early monsoon onset, which affected mining activity and electricity demand. "The sequential performance of cement, steel, and refinery products improved in May compared to April, offering some cushion. However, overall momentum remains subdued," he noted.

Based on core sector trends, ICRA estimates the Index of Industrial Production (IIP) growth for May 2025 to be in the range of 1.5% to 2.5%.

Outlook

The core sector’s weak showing raises concerns for broader industrial activity, given its 40.27% weight in the overall IIP. As monsoon-related disruptions and global uncertainties continue, policymakers and industry watchers will closely monitor the coming months for signs of recovery.