Core industries growth falls to 19-month low of 0.4% in March following West Asia crisis

India’s core sector growth slowed to a 19-month low of 0.4% in March, dragged by a sharp contraction in fertiliser output amid supply disruptions linked to the West Asia crisis.

Written by FE Bureau

April 20, 2026 23:06 IST

Four of eight core industries contracted in March as fertiliser, coal and crude output declined, with economists flagging supply constraints and high energy costs as key pressures on growth.

Growth in the infrastructure sectors’ output contracted to a 19-month low of 0.4% year-on-year in March, mainly due to a sharp decline in fertiliser production amid the West Asia crisis.

According to data released by the Ministry of Commerce and Industry on Monday, fertiliser output declined by an unprecedented 24.6% year-on-year. Four of the eight components of the Index of Eight Core Industries (ICI) recorded contraction in March.

Among the sectors, natural gas grew 6.4% year-on-year, followed by cement (4%), steel (2.2%), and refinery products (0.1%). The sectors that contracted were crude oil (-5.7% YoY), coal (-4.0%), electricity (-0.5%), and fertilisers. In March 2025, the ICI had expanded by 4.5% year-on-year.

What do researchers say?

Devendra Pant, Chief Economist at India Ratings and Research, said supply-side issues, including reduced availability of gas and high energy costs, resulted in fertiliser production declining by 24.6% in March.

“The gas supply to the fertiliser industry was reduced to 70-75% in March due to the Iran war, which has now increased to around 95%. This is likely to have an adverse impact on fertiliser production even in April,” Pant said. He expects the core sector to grow around 2% in April 2026.

Aditi Nayar, Chief Economist at ICRA, said an adverse base effect weighed on electricity generation, while a shortage of inputs amid the West Asia crisis curtailed fertiliser output. Besides, growth in steel and cement output also weakened in March compared with February, suggesting that construction activity slowed during the month, she said.

Madan Sabnavis, Chief Economist at Bank of Baroda, said the war’s impact was visible in the sharp fall in fertiliser production, while natural gas production was stepped up to address import challenges.

“Looks like private investment remained cautious in the face of the war,” Sabnavis said.

The cumulative growth rate of the ICI for FY26 stands at 2.6% year-on-year. Pant noted that the FY26 growth of 2.6% was a five-year low. Barring cement (8.6%), electricity (0.9%), and steel (9.1%), all other sectors contracted during FY26, he said.

Economists expect Index of Industrial Production (IIP) growth to be in the range of 1% to 2% in March, down from 5.2% in February, due to the adverse impact of surging energy prices. The ICI measures the combined and individual performance of production in eight core industries, which comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).

This article was first uploaded on April twenty, twenty twenty-six, at six minutes past eleven in the night.