Core Sector Growth Slows to 0.4% in March, Marks Weakest Performance Since August 2024

India's Core Infrastructure Industries Contract 0.4 Percent in March

India's eight core infrastructure industries contracted 0.4 percent in March, marking the weakest performance in nearly two years and a sharp reversal from 2.8 percent growth in February. This decline comes as weakness across coal, crude oil, fertilisers, and electricity outweighed gains in steel and natural gas, signalling softer momentum in sectors that form the backbone of industrial activity.

The March print is the first contraction since August 2024, when the core sector had shrunk 1.45 percent, and among the weakest readings since the Covid shock in 2020-21. The contraction is likely to feed into economic activity, as the West Asia crisis weighed on industrial production, particularly in sectors that are heavily dependent on raw materials from Gulf nations.

Fertilisers See Steepest Fall

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The sharpest drag came from fertilisers, where output plunged 24.6 percent in March, the worst reading since the start of the series. This decline follows a 3.4 percent rise in February. The West Asia crisis is likely to further impact fertiliser production, given that Gulf nations are among the largest suppliers of raw materials for fertiliser.

Coal production declined 4 percent in March, reversing growth of 2.3 percent in the previous month, while crude oil output fell 5.7 percent, extending a prolonged contraction in domestic hydrocarbon production. Electricity generation also slipped 0.5 percent, compared with 2.3 percent growth in February, suggesting softer power demand or favourable weather conditions reducing consumption.

Steel Remains Bright Spot

Among the positive segments, steel output grew 2.2 percent, though sharply slower than 7.6 percent in February. Natural gas output rose 6.4 percent, improving from a 5 percent contraction a month earlier, as the government ramped up capacity by over 40 percent to cover for falling imports which are also West Asia dependent. Refinery products were broadly flat at 0.07 percent growth, while cement output expanded 4 percent, but growth moderated significantly from 8.9 percent in February, indicating some slowdown in construction-related activity.

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What it Means for Growth

The core sector accounts for about 40 percent of the Index of Industrial Production (IIP), making it a key lead indicator for industrial growth. The contraction suggests industrial momentum may have softened at the end of the fiscal year.

Comparison of Core Sector Growth

Note: Negative growth percentages indicate contraction.