Core industries growth eases to 4.8% in August on iron ore, coal drag

Output growth in India's nine core industries slowed to a three-month low of 4.8 per cent in August, from a downwardly revised 5 per cent in July, as a steep loss of momentum in iron ore and contraction in coal, oil, gas and fertilizer sectors put a drag on the headline number, according to data released by the Ministry of Commerce and Industry on Monday.

 

The overall index eased to a four-month low of 119.2 from 120.8 in July, a sequential decline of 1.32 per cent even as year-on-year growth stayed in positive territory.

 

Iron ore, which carries a weight of 4.9 per cent, was the single biggest source of the slowdown. Its growth collapsed to an 11-month low of 5.5 per cent in August from 29.5 per cent in July, with the sector's index dropping to 96.1 from 104.8.

 

 

Coal, weighted at 5.6 per cent, swung to a contraction of 3.8 per cent after expanding 7.6 per cent in July, returning to negative territory after two months of gains.

 

Rahul Agrawal, Principal Economist, ICRA attributed the headline number to an unfavourable base.

 

“Among the mining-related segments, coal and iron ore saw deterioration in their performance in August relative to July, largely owing to an adverse base. These two together pulled down the headline core output growth by as much as 130 bps between these months,” Agarwal noted. 

 

Five of the nine sectors registered positive growth during the month. Cement, electricity, iron ore, steel and refinery products stayed in expansion, while coal, natural gas, crude oil and fertilisers contracted.

 

Electricity, the heaviest component of the index at 30.9 per cent, cushioned the headline. Its growth rose to a 27-month high of 11.6 per cent in August from 8.4 per cent in July. Agarwal reckoned that excluding electricity generation, core output rose by just 1.6 per cent in the month compared to 3.4 per cent in July.

 

The reading marked the third print under the new series, with 2022-23 as the base year. The series replaced the earlier 2011-12 base and expanded the basket to nine sectors from eight with the addition of iron ore. 

 

Cumulatively, the index grew 4.3 per cent during April-August 2026, nearly double the 2.4 per cent recorded in the same period a year earlier.

 

Cement remained the fastest growing sector, up 12.5 per cent, although little changed from 12.7 per cent a month earlier. Steel growth picked up to 3.4 per cent from a 1.9 per cent in July.

 

Refinery products, the second-highest weighted sector at 22.6 per cent, grew 2.6 per cent, easing from 3 per cent in July but holding on to the recovery after an earlier three-month contraction.

 

Among the sectors in decline, fertilisers fell 12.4 per cent, deepening from an 8 per cent drop in July and marking a sixth consecutive month of contraction. Natural gas output shrank 4.9 per cent, widening the contraction compared to July's 3 per cent, while the crude oil contraction narrowed to 3.6 per cent from 5.3 per cent.

 

Madan Sabnavis, chief economist at Bank of Baroda attributed the contraction in fertilizer production to the slowdown in sowing season and increased imports.

 

“Supply side issues, that is, reduction of gas supply and high energy cost has been adversely impacting fertilizer production, following the West Asia conflict outbreak,” said Devendra Pant, Chief Economist, India Ratings and Research (Ind-Ra).

 

The core sectors account for about 40 per cent of the Index of Industrial Production (IIP). Icra expects IIP growth to ease to 5-6 per cent in August, while Bank of Baroda has pegged it in the range of 6-6.5 per cent. IIP growth was 6.7 per cent in July.