India’s Core Sector Growth Slows to 2% in July as Fossil Fuels Weigh; Steel, Cement Shine

Industrial activity in India’s eight core sectors grew just 2% in July 2025, sharply down from 6.3% a year earlier, as fossil fuel industries dragged overall performance. Fresh government data released on Wednesday (August 20) show that while energy-linked sectors slumped, construction-driven segments like steel and cement surged with double-digit gains.

The Index of Eight Core Industries, compiled by the Commerce and Industry Ministry, also revealed that July’s growth was slightly weaker than the 2.2% expansion recorded in June.

Coal production suffered the steepest fall, plunging 12.3%, its worst monthly performance in at least five years. This marked the second straight month of double-digit contraction, highlighting persistent supply and demand challenges.

Other fossil fuel-linked sectors remained under strain. Natural gas output shrank 3.2%, extending its losing streak to 13 consecutive months, while crude oil fell 1.3%, contracting in 14 of the last 15 months. With weaker upstream production, refinery products also slipped 1.05%, the sector’s poorest showing since April.

Experts link the slump partly to structural changes. “Besides demand being low, there is a correlation with global crude oil prices that have been steady in the $60–70 per barrel range,” said Madan Sabnavis, Chief Economist at Bank of Baroda. “This also points to slowing consumption of fuels like petrol and diesel, partly due to the rising adoption of EVs, especially in passenger cars.”

By contrast, core construction materials provided a silver lining. Steel output jumped 12.8%, its best performance in 21 months, while cement rose 11.7%, the strongest in four months. Analysts attribute the surge to sustained infrastructure spending and steady housing demand.

Some smaller segments also showed improvement. Fertilisers grew 2%, ending a three-month contraction streak, while electricity generation edged up 0.5%, bouncing back after two months of decline.

With half the index dominated by fossil fuels, their continued weakness is pulling overall growth lower, despite resilience in construction-linked sectors. Economists say that unless energy demand revives, industrial momentum could remain uneven in the coming months.