In March 2025, India’s core infrastructure sectors, which represent a significant 40% of the nation’s industrial output, experienced an annual growth of 3.8%, marking the highest increase in two months. While this growth is notable, it falls short of the 6.3% expansion observed in March of the previous year. According to preliminary data from the Ministry of Commerce and Industry, only three sectors—electricity, cement, and steel—showed an uptick in production during this period.

Core Sector Performance: A Mixed Bag

The contribution of the core sectors to the Index of Industrial Production (IIP) is substantial, standing at 40.27%. However, industrial production as a whole slowed down to a six-month low of 2.9% in February 2025, primarily due to lackluster performance in manufacturing and mining. This decline is significant, especially when compared to the previous low of zero recorded in August 2024.

Key Growth Areas in March

• Cement: Production surged by 11.6%.
• Steel: Output increased by 7.1%.
• Electricity: Reported a growth of 6.2%, a rise from 3.6% in February, attributed to the onset of summer across many regions.

Despite these positive figures, some sectors faced challenges. Fertilizer production saw a decrease to 8.8% growth, down from 10.2% the prior month. The decline in refinery product output to 0.2% from 0.8%, alongside a 1.6% drop in coal output, indicates ongoing weaknesses.

Declines in Energy Production

Natural gas and crude oil production faced significant contractions of 12.7% and 1.9%, respectively. This decline is reflective of lower international prices for crude oil, while the increase in imports has diminished the need for domestic natural gas production.

Economic Insights

Madan Sabnavis, Chief Economist at the Bank of Baroda, commented on the mixed growth pattern within the core sector. He noted that while the construction-related industries are thriving, oil-related outputs are lagging. Sabnavis highlighted that increased government spending towards the end of the financial year has largely driven the rise in cement and steel production. He also pointed out a sharp rise in private sector investment announcements during the fourth quarter, which bodes well for future demand for steel.

For March, Sabnavis anticipates that IIP growth could fluctuate between 4% and 4.5%, indicating a cautiously optimistic outlook for India’s industrial landscape.

Conclusion

Despite facing headwinds in certain areas, the Indian economy shows resilience through the performance of core infrastructure sectors. The growth in cement, steel, and electricity production reflects ongoing investment and demand, while challenges in energy production underscore the need for strategic adjustments. As the nation moves forward, monitoring these trends will be vital for understanding the broader economic context.