March dip drags India's FY26 core sector showing to five-year low

Fertiliser, coal, crude oil and electricity drag index; FY26 growth slows to a five-year low as input shortages and weak output weigh on industrial momentum

The first month of the West Asia conflict dented output in India’s eight core sectors by 0.4 per cent, making their March trajectory the worst show in 19 months, and marking a sobering end to financial year 2025-26 (FY26) with cumulative growth in these infrastructure sectors sliding to a five-year low of 2.6 per cent.

 

Fertiliser production growth slumped to a 13-year low in FY26, and as many as five of the eight core segments recorded their weakest growth in five years, an analysis of the full year trends revealed. These sectors include coal, crude oil, natural gas, refinery products and electricity. 

   

The tumult in March, resulting from the US-Israel-Iran war, took a severe toll on fertiliser output in particular and dragged down the full-year print. 

 

The fertiliser sector posted the sharpest single-month fall of any sector in March, contracting a steep 24.6 per cent compared to a 3.4 per cent uptick recorded in February. The March print thus marks the steepest decline in the sector since the current data series began in April 2012. A shortage of inputs amidst the West Asia crisis curtailed the fertiliser output, according to Aditi Nayar, chief economist at ICRA.

 

Another three of the eight core sectors — crude oil, coal, and electricity — recorded negative year-on-year growth in March. Moreover, six of the eight sectors recorded a deceleration from February’s upticks, including steel and cement, which recorded a growth of 2.2 per cent and 4 per cent during the month. 

 

Crude oil production fell 5.7 per cent in March, extending a long-running structural decline in domestic output that has now pulled the sector's cumulative index down 2.8 per cent for the full year. Natural gas mirrored the annual decline, also down 2.8 per cent for FY26, despite a 6.4 per cent uptick in March itself, a rare bright spot in an otherwise subdued month.

 

Refinery products, which carries the largest weight in the index, saw a mild 0.1 per cent uptick during the month compared to a 1 per cent contraction recorded in February. The yearly growth in the sector, however, entered the red zone, registering contraction of 0.1 per cent.s

 

Coal production contracted 4 per cent in March and closed FY26 with a cumulative decline of 0.5 per cent, reversing four years of expansionary trend. Electricity generation, which carries the second-highest weight in the index at 19.85 per cent, slipped 0.5 per cent in March on an adverse base effect, though it still managed a modest 0.9 per cent gain for the full year. 

 

Against this backdrop, steel and cement stood out as the year's clear outperformers, being the only sectors registering growth of more than 1 per cent during the financial year. Steel production rose 2.2 per cent in March and surged 9.1 per cent for FY26 as a whole. Cement grew 4 per cent in March and 8.6 per cent for the year. 

 

Core sectors constitute about 40 per cent of the Index of Industrial Production (IIP). Nayar expects IIP growth to moderate to around 1 per cent to 2 per cent in March as against 5.2 per cent in February, owing to the adverse impact of the surge in energy prices and constrained availability of the same.

 

The March numbers of the Index of Core Industries (ICI), released by the Commerce and Industry Ministry on Monday, reflect the second contraction in FY26 after a 0.1 per cent drop was recorded in October 2026, and the second straight month of deceleration. After a 4.7 per cent uptick in December and January, core sectors’ growth had eased to 2.8 per cent in February, according to revised data released by the ministry.