​Alarm bells: on the Index of Eight Core Industries data

India’s economy seems to have begun the financial year 2026-27 on a decidedly tepid note, going by the data released so far for April 2026. The latest of these, the Index of Eight Core Industries (ICI), shows that growth in these key sectors stood at a modest 1.7% in April. It would be easy to attribute this to the ongoing crisis in West Asia, and that is certainly a factor, but the slowdown started well before the war broke out. Growth in the ICI averaged just 2.8% in the entire financial year 2025-26, down from the 4.5% average for 2024-25 and significantly slower than the growth in the previous three years, each of which was above 7%. This suggests a more systemic domestic issue rather than an externally driven transient phase. Of the eight sectors, only three — steel, cement, and electricity — grew at all in April 2026. The rest contracted. The crude oil and natural gas sectors have, in fact, contracted for 16 and 22 consecutive months, respectively. This should be of particular concern. Energy output cannot be ramped up overnight, but falling output for such long stretches should have raised some policy alarm bells even before the current energy crisis began. Separate data from the Ministry of Petroleum and Natural Gas show that domestic consumption of natural gas fell in April. Had India installed long-term gas storage facilities, as it should have, this fall in consumption would have provided a window to fill those reserves. Since such reserves do not exist, LNG imports in April were cut by 30%, likely in a bid to slow the forex outflow. The volume of both oil imports and domestic production fell in April.

This lower fuel consumption could be a result of government curbs on commercial usage. Nevertheless, the implications for growth are severe and are likely to play out over the next few months. Fertilizer output contracted in April after a brief return to growth in March. The only mitigating factor for lower fertilizer output is that demand is likely to be lower this year as farmers grapple with a below-normal monsoon and above-normal El Niño. This is, however, far from comforting. The resultant dip in output and rural demand is a grave prospect for the Indian economy. Steel and cement are the only sectors to have grown consistently, indicating sustained construction activity likely propelled by government expenditure. It remains to be seen how long this push can last amid the fiscal strain brought on by the current crisis. It is also not just the core sector data that is concerning. PMI data is close to four-year lows and GST collections from domestic sales are growing only slightly faster than inflation. The alarm bells are now difficult to ignore.