India's core sector industries experienced a growth of 1.7% in June 2025, marking a three-month high, according to data released by the Ministry of Commerce and Industry. This is a slight increase compared to the revised growth of 1.2% in May 2025, but significantly lower than the 5% growth recorded in June of the previous year.

The eight core sectors, which include coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity, collectively comprise 40.27% of the Index of Industrial Production (IIP). While the overall growth showed a slight improvement, the performance across individual sectors was mixed.

Five out of the eight core sectors experienced a contraction in output during June 2025. Coal production saw a sharp decline of 6.8%, partly due to the high base effect from the previous year. Crude oil and natural gas production also fell by 1.2% and 2.8% respectively, continuing a trend of stagnation in India's upstream energy sector. Fertilizer output decreased by 1.2%, and electricity generation contracted by 2.8%, influenced by cooler weather and excess rainfall reducing power demand.

However, some sectors showed positive growth. Refinery products, steel, and cement output recorded increases of 3.4%, 9.3%, and 9.2% respectively. The growth in the steel and cement sectors reflects increased activity in the construction sector, potentially supported by government capital expenditure.

The cumulative growth rate of the core sector for the April-June quarter of FY26 stands at 1.3%, compared to 6.2% during the same period last year. This deceleration highlights a broader industrial slowdown. ICRA projects that the overall IIP growth for June 2025 will likely be between 1.5% and 2.5%.

Several factors contributed to the varied performance of the core sectors. The contraction in coal production was attributed to an elevated base from the previous year and possible supply disruptions. Excess rainfall in the latter half of June reduced electricity demand and generation, impacting thermal power and coal demand. Crude oil and natural gas production continue to be affected by stagnant domestic production due to aging fields and underinvestment.

Looking ahead, the outlook for the core sectors remains mixed. While some sectors like steel and cement are expected to maintain growth momentum, driven by construction activity and government spending, others face challenges. Overall, five out of the eight sectors still contracted in June, indicating an uneven industrial recovery. Capital formation and global demand remain challenging, affecting export-oriented sectors and new investments. The persistent weakness, particularly in the energy segment, continues to weigh on overall GDP and industrial performance for the quarter.