India's Core Sector Growth Slows To 0.7% In May 2025

India’s core sector growth slowed sharply to just 0.7% in May 2025, the lowest level seen in nine months, according to data released by the Ministry of Commerce & Industry on June 20. This marks a significant drop from the 1% growth recorded in April and the 4.5% seen in March.

What Is the Core Sector?

India’s core sector includes eight key industries:

Coal

Crude Oil

Natural Gas

Refinery Products

Fertilisers

Steel

Cement

Electricity

These industries account for 40.27% of the overall Index of Industrial Production (IIP) and are considered leading indicators of the country’s industrial health.

Why Did Growth Slow?

The slowdown in May was largely driven by a sharp decline in electricity generation, which dropped by 5.8% compared to the same period last year. Other major contributors to the weak performance were:

Fertiliser output: -5.9%

Natural gas production: -3.6%

Crude oil output: -1.8%

This broad-based weakness significantly pulled down overall growth.

Sectors That Showed Improvement

Despite the slowdown, some industries performed well:

Cement: +9.2%

Steel: +6.7%

Coal: +2.8%

Refinery products: +1.1%

These sectors helped cushion the overall decline, though not enough to offset the larger drop in electricity and fertiliser output.

April–May Performance Much Weaker Than Last Year

The cumulative core sector growth for April and May 2025 stood at just 0.8%, compared to a strong 6.9% growth during the same period in 2024.

Government officials cited a high base effect and production challenges in several sectors as key reasons for the slowdown, especially the sharp fall in electricity output, which had recorded double-digit growth last year.

Bank and Deposit Growth Also Slowing

Alongside the core sector numbers, the Reserve Bank of India reported a slowdown in credit and deposit growth:

Bank Loan Growth:

Actual: 9.0%

Previous: 9.8%

Deposit Growth:

Actual: 9.9%

Previous: 10.0%

This suggests that both demand for credit and liquidity conditions are cooling, in line with weaker industrial growth.

What’s Next?

The next update for June 2025 core sector data will be released on July 21, 2025. Markets and policymakers will closely watch whether this slowdown continues or if there is a rebound in key sectors.

Key Takeaway

India’s core industries are showing signs of stress, particularly in power and fertilisers. If this trend continues, it may impact overall industrial growth and the broader economy. The government may need to take targeted steps to revive output in lagging sectors.