India’s Core Sector Shrinks for First Time in Two Years; March Output Dips 0.4%

New Delhi: In its weakest performance in almost two years, India’s core sector activity contracted in March 2026; The composite index of eight basic industries (ICIs) fell 0.4 percent year-on-year after growth slowed to 2.3 percent in February this year. This decline was mainly due to weak performance in fertilisers, crude oil, coal and electricity, which all recorded negative growth during the month, the government said on Monday.

Despite the monthly contraction, commerce ministry data showed that the cumulative performance for the entire fiscal year showed a moderate increase. “ICI grew by (provisional) 2.6 percent during April-March 2025-26 compared to the same period in the previous year. February 2026 data has been revised to 2.8 percent growth,” the data said.

ICI, which tracks coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity, accounts for 40 percent of the index of industrial production (IIP), a broader measure of factory output in the economy. But the March data reflects the impact following disruptions to global energy supplies amid the ongoing war in the Middle East.

According to ministry data, the month painted a mixed picture on a sector basis. “Coal production fell 4.0 percent, crude oil fell 5.7 percent, fertilizer fell a sharp 24.6 percent, and electricity production also fell 0.5 percent. However, natural gas, steel, cement, and refinery products provided some support; growth was driven by a 6.4 percent increase in natural gas and modest gains in steel and cement,” the data showed.

Looking at the long term, data showed that some sectors continued to expand strongly throughout the year. The report stated, “While steel and cement stood out with cumulative growth of 9.1 percent and 8.6 percent, respectively, in the 2025-26 period, crude oil and natural gas remained in the contraction zone.”

Commenting on the data, Aditi Nayar, chief economist at Icra Ltd, said that given these trends and the adverse impact of the rise in energy prices and limited supply, Icra expects IIP growth to slow to 1.0-2.0 per cent in March 2026 compared to 5.2 per cent in February 2026. Nayar said there was a decline in production in four of the eight sectors.

“While putting negative base pressure on electricity generation, input shortages amid the West Asian crisis constrained fertilizer production, which fell by an unprecedented 24.6 percent in the month. Additionally, growth in steel and cement production also weakened in March 2026 compared to February 2026, indicating that construction activities slowed down during the month,” he said.