The latest data on the performance of the core industrial sectors show the economy may be facing an industrial uptick, but questions about its sustainability remain. Growth in the Index of Core Industries rose to a series-high of 7.9% in September 2026, the second consecutive month of accelerated performance. Any such improvement is to be celebrated, but a deeper look at what is driving it is also warranted. The coal sector saw growth suddenly shoot up to 10.7% in September. The unexpected and unusual nature of this rapid acceleration can be borne out by the fact that the sector contracted by 1.1% over the longer April-September 2026 period. The growth in coal in September was likely a temporary blip aided by a statistical low base and, more importantly, pressure from power plant operators over rapidly depleting coal stocks amid the heat wave. The electricity sector grew 11.4% in September, capping off a half-year dominated by double-digit growth. This surge in electricity-related demand for coal will likely wane, especially since the El Niño factor that drove the heat wave will also result in a milder winter. The other sector that results in high coal usage, the steel sector, did accelerate in September, but not by enough to sustain the coal sector’s September output. The uptick in steel did, however, result in a return to double-digit growth for the iron ore sector, which should bode well for the mining component of the larger Index of Industrial Production.
The performance of the crude oil, natural gas, and refinery products sectors also highlights the fiscal problems India faces. At a time when the crude oil and natural gas sectors have both contracted continuously since 2024, refinery output rose to 10.3% in September. This means that the refineries were increasingly processing expensive imported oil. India’s oil imports in September were up 7% by volume but jumped 47% in terms of value due to the high price of oil. This is set to worsen. The attacks on Saudi Arabia’s energy infrastructure have already pushed global oil prices above $112 a barrel, almost a six-month high. The reprieve from the U.S. on potential tariffs linked to imports of Russian oil provide India a reliable source, but the days of discounts are long gone. It is the time of premium pricing, and each barrel imported is eating into India’s foreign exchange reserves, which are also being used to defend the rupee. Cement and steel are the only sustainably growing core sectors, and those too are based on government infrastructure spending. At a time when industrial output is only temporarily propped up, the government’s fiscal space is fast shrinking.
Published - October 23, 2026 12:30 am IST