September 2025 core sector growth tapers to 3.02% on base effect

23 Oct 2025 , 11:35 AM

SEPTEMBER CORE SECTOR GROWTH EASES TO 3.02%

Core sector growth for September 2025 tapered to 3.02%. The growth undertone is still positive because the August core sector growth got revised up by 26 bps from 6.27% to 6.53%. The easing of core sector in September was more due to the base effect. Between August 2024 and September 2024, the core sector growth had turned around from -1.45% to +2.44%. This base effect led to lower core sector growth in September 2025.

Here it must be noted that the bounce in August 2025 core sector growth was a clear sign of capex coming back; and that narrative has not changed. As a result of this surge in growth, core sector growth for the first 6 months of FY26 stands at 2.91%; albeit lower than comparable numbers in FY25 and FY24. In the last few months, the government has clearly tilted its focus towards a capex-led revival to offset the tariff impact on growth.

CORE SECTOR LEADERS AND LAGGARDS IN SEPTEMBER 2025

A total of 4 out of 8 core sectors saw positive growth in September 2025. In the core sector basket, refinery product has the highest weightage of 28.04%, followed by electricity at 19.85% and steel 17.92%. Of these 3 sectors, refining contracted -3.65%, Steel grew 14.11%, and electricity grew 2.13% in August 2025. Another heavyweight contributor to the downside was coal at -1.19%, while cement continued to again show smart traction at 5.31%. The bounce in cement and steel in indicative of a residential and commercial construction boom. All the 4 Energy-related segments witnessed contraction in September 2025; which included Coal, Oil Exploration, Natural Gas, and Refinery Products.

BREAKING DOWN SEPTEMBER 2025 CORE SECTOR GROWTH

The table captures breakdown of the +3.02% yoy core sector growth for September 2025 across 8 infrastructure baskets. Previous data points have been revised, appropriately.

Months	Overall (%)	Coal (%)	Crude (%)	Natural Gas (%)	Refinery (%)	Fertilizers  (%)	Steel  (%)	Cement (%)	Electricity  (%)
Sep-24	2.44	2.64	-3.87	-1.30	5.76	1.89	1.81	7.58	0.49
Oct-24	3.84	7.76	-4.85	-1.25	5.20	0.37	5.71	3.14	1.96
Nov-24	5.78	7.49	-2.12	-1.94	2.90	2.02	10.54	13.10	4.42
Dec-24	5.09	5.29	0.65	-1.76	2.83	1.67	7.31	10.32	6.17
Jan-25	5.08	4.64	-1.14	-1.51	8.31	2.96	4.73	14.31	2.28
Feb-25	3.36	1.65	-5.17	-6.04	0.75	10.24	6.85	10.71	3.63
Mar-25	4.51	1.64	-1.90	-12.74	0.20	8.83	8.69	12.22	7.49
Apr-25	0.99	3.46	-2.75	-0.94	-4.50	-4.16	4.38	6.34	1.75
May-25	1.19	2.76	-1.80	-3.56	1.06	-5.89	7.44	9.65	-4.71
Jun-25	2.20	-6.81	-1.21	-2.77	3.36	-1.19	9.71	8.16	-1.21
Jul-25	3.75	-12.27	-1.31	-3.21	-1.12	2.02	16.58	11.57	3.72
Aug-25	6.53	11.36	2.38	-2.20	2.99	4.58	13.55	5.36	4.15
Sep-25	3.02	-1.19	-1.25	-3.83	-3.65	1.63	14.11	5.31	2.13

Data Source: DPIIT (Department for Promotion of Industry and Internal Trade)

Let us look at some of the key performers and pressure points. Once again, oil extraction and natural gas were hit by supply chain issues and policy constraints. Refinery products also contracted, resulting in a major impact on the core sector due to 28.04% weightage. All energy sources were under pressure. On the upside traction in steel and cement point to a sharp revival in construction and infrastructure demand. Just as refinery products made a difference on the upside last month, it has made an impact on the downside this month.

HIGH FREQUENCY CORE SECTOR GROWTH (SEPTEMBER 2025)

While yoy growth captures long-term trends, high frequency MOM data captures short term trends and subtle shifts.

Core Sector Component	Weight	Sep-25 (YOY) %	Sep-25 (MOM) %	FY26 Cumulative (%) #
Coal	10.3335	-1.19%	-2.53%	-0.72%
Crude Oil	8.9833	-1.25%	-8.26%	-1.06%
Natural Gas	6.8768	-3.83%	-3.70%	-2.86%
Refinery Products	28.0376	-3.65%	-6.38%	-0.29%
Fertilizers	2.6276	+1.63%	-4.73%	-0.38%
Steel	17.9166	+14.11%	-1.75%	+10.96%
Cement	5.3720	+5.31%	+0.75%	+7.71%
Electricity	19.8530	+2.13%	-4.43%	+0.87%
Core Sector Growth	100.0000	+3.02%	-3.84%	+2.91%

Data Source: DPIIT (# Apr-Sep data)

The high frequency MOM core sector growth contracted by -3.84% in September 2025, the fourth consecutive month of contraction, indicating short term pressures due to tariffs and supply chain constraints. The pressure came from across the board with 7 out of 8 core sectors showing MOM contraction. Only cement showed positive traction in terms of high frequency growth in September 2025. These are distinct signs of a short-term peaking-out of infrastructure growth; with most of the pressure likely to come from the energy basket. Even the cumulative 6-month core sector indicates that 5 out of 8 core sectors are under stress and contracting on a yoy basis. Steel and Cement are doing the heavy lifting!

CHARTING LONG TERM STORY OF CORE SECTOR GROWTH

The cumulative core sector growth in first 6 months of FY26 stood at 2.91%; a sharp upgrade since July data. However, this is sharply lower than the 4.27% growth in 6M-FY25 and 8.18% in 6M-FY24. Finance Minister, Nirmala Sitharaman, had underlined that the real issue was the absence of private sector participation in capex, despite sitting on record cash flows. That cannot be entirely denied, although private sector may have other reasons.

Over the last 13 years, the average core sector growth stands at 4.0%; and if the COVID year (FY21) is excluded, the average stands at 4.9%. At 2.91%, the FY26 figure is well short of that average. A lot will depend on whether the government opts to give a big infrastructure thrust through sustained government support and private sector incentives. That could just about make the difference; and also compensate for global risks!