India’s core sector industry output increased at its fastest pace in five months in June 2026, according to data released by the ministry of industry and commerce on Monday. The latest data also shows that the shock to fertilizer production because of the West Asia conflict has mostly subsided although it is still to recover fully. On the other hand, refinery products contraction eased in June, but it is not clear if that is related to crude oil imports from West Asia. With both Iran and US ending the memorandum of understanding on the cease fire in the region, it underlines supply side vulnerabilities for critical inputs.
Event Context
India’s revamped Index of Core Sector Industries (ICI) grew at 5% in June 2026, the highest since January 2026 when it grew at 5.2%. The data is the first in the revised series with base year of 2022-23 instead of 2011-12 and nine instead of eight industries in the previous series. The revision follows a change in the other more broad-based high frequency industry data series, the Index of Industrial Production (IIP). The revised ICI series adds iron ore to the list of industries covered and will now have a lower share of 33% in IIP basket than the previous series when it was 40%.
Following the start of war in West Asia in February and the subsequent closure of traffic in Strait of Hormuz, certain specific components in the ICI have become more interesting than the index as a whole. Among the most important variables in ICI has been fertilizer production, which depends critically on imported inputs such as liquified natural gas. Fertilizer production index under the new series fell sharply to 76.5 in March 2026 ICI data, the lowest monthly value in the new series. In the old series, which gives data until May 2026, the index of the sector fell to 95.7 in March, the lowest since April 2021. Things have improved subsequently, with the fertilizer production index – in the new series — rising steadily in April, May and June to 82.5, 101.2 and 102.3 respectively. To be sure, each of these values still show a contraction compared to previous year’s values. While the June 2026 contraction (3.3%) is higher than the May value (1%), it is driven by base effect rather than lower production on a sequential basis.
Refinery products, which have a weight of 22.6% in the new index compared to 28% earlier, also contracted in June. However, the 4.7% contraction in the month was less than the of 8.2% contraction in May. To be sure, the sector remained relatively un-affected in March and April and the sharp May contraction was despite crude imports recording a growth in volume terms.
The only other sectors with a contraction in the ICI index natural gas and crude oil, which have weights of 3.8% and 7.4% in the new index, down from 6.9% and 9% in the old index. These sectors, which record domestic production of these energy commodities, contracted of 7.4% and 4.2% in June respectively. Natural gas contraction was the fastest in the new series and crude oil contraction was the same as in May.
The newly included iron ore sector, which has a 4.9% weight, expanded 43.9%, the fastest in the new series beginning April 2024. Cement, whose weight has decreased 1 percentage point to 4.4%, expanded 9.8%, the fastest since January. Electricity, whose weight has increased from 19.9% to 30.9%, recorded a 9.8% growth, slower than the 11.2% growth in May 2026, but otherwise fastest since May 2024. Coal, whose weight has nearly halved to 5.6%, recorded a 1.4% expansion, the fastest since February. Steel, whose weight changed marginally, expanded by 4.6%, fastest since April.
