August 2025 core sector growth scales 15-month high of 6.27%

23 Sep 2025 , 11:04 AM

AUGUST CORE SECTOR GROWTH SURPRISES AT 6.27%

Core sector growth for August 2025 was a major positive surprise at 6.27%. As if that was not enough, even the core sector growth for July 2025 was upgraded by 172 basis points from 2.03% to 3.75%. At 6.27%, the core sector growth is at a 15-month high and has come a long way from the core sector contraction seen in August 2024.

It must be said that the bounce in August core sector growth was a clear sign of capex coming back. As a result of this surge in growth, core sector growth for the first 5 months of FY26 stands at 2.83%; albeit lower than comparable numbers in FY25 and FY24. The centre giving more focus in its budget to capex over revenue spending seems to have helped.

CORE SECTOR LEADERS AND LAGGARDS IN AUGUST 2025

A total of 6 out of 8 core sectors saw positive growth in August 2025. In the core sector basket, refinery products have the highest weightage of 28.04%, followed by electricity at 19.85% and steel 17.92%. Of these 3 sectors, refining grew 2.99%, Steel grew 14.18%, and electricity grew 3.06% in August 2025. Another heavyweight contributor was coal at 11.36%, while cement continued to show smart traction in August at 6.14%. The bounce in cement and steel hint at a construction boom. The 2 sectors to witness contraction in August 2025 were the standard suspects; Natural Gas -2.20%, and crude extraction -1.19%. In both cases, the supply chain challenges remain elevated.

BREAKING DOWN AUGUST 2025 CORE SECTOR GROWTH

The table captures breakdown of the +6.27% yoy core sector growth for August 2025 across 8 infrastructure baskets. Previous data points have been revised, appropriately.

Months	Overall (%)	Coal (%)	Crude (%)	Natural Gas (%)	Refinery (%)	Fertilizers  (%)	Steel  (%)	Cement (%)	Electricity  (%)
Aug-24	-1.45	-8.05	-3.44	-3.61	-1.03	3.15	4.13	-2.53	-3.72
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	6.27	11.36	-1.19	-2.20	2.99	4.58	14.18	6.14	3.06

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. With the end of the monsoons in most areas, coal output bounced back sharply, while electricity supply showed a relatively lukewarm recovery in August 2025. On the upside solid traction in steel and cement point to a sharp revival in construction and infrastructure demand. However, the real cutting edge came from refining output bouncing to 2.99%, which made a big difference with its weightage of 28.04% in the core sector basket.

HIGH FREQUENCY CORE SECTOR GROWTH (AUGUST 2025)

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

Core Sector Component	Weight	Aug-25 (YOY) %	Aug-25 (MOM) %	FY26 Cumulative (%) #
Coal	10.3335	+11.36%	+7.62%	-0.71%
Crude Oil	8.9833	-1.19%	-1.06%	-1.71%
Natural Gas	6.8768	-2.20%	+0.26%	-2.47%
Refinery Products	28.0376	+2.99%	-2.61%	+0.36%
Fertilizers	2.6276	+4.58%	+1.55%	-0.83%
Steel	17.9166	+14.18%	-1.34%	+10.43%
Cement	5.3720	+6.14%	-3.34%	+8.36%
Electricity	19.8530	+3.06%	-4.20%	+0.46%
Core Sector Growth	100.0000	+6.27%	-1.66%	+2.83%

Data Source: DPIIT (# Apr-Aug data)

The high frequency MOM core sector growth contracted by -1.66% in August 2025, the third consecutive month of contraction. The pressure came from crude, refining, steel, cement and electricity. Only coal, natural gas and fertilizers displayed positive traction in the core sector basket. There are distinct signs of a short-term peaking-out of infrastructure.

CHARTING LONG TERM STORY OF CORE SECTOR GROWTH

The cumulative core sector growth in first 5 months of FY26 stood at 2.83%; a sharp upgrade since July data. However, this is sharply lower than the 4.64% growth in 4M-FY25 and 8.00% in 4M-FY24. As Nirmala Sitharaman pointed out, the real issue is the absence of private sector participation in capex, despite sitting on record cash flows. 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 2.83%, the FY26 figure is well short of that. However, the government may opt to give a big push to infrastructure growth through a sustained plan of government support and private sector incentives. That could just about make the difference; and also compensate for the global risks!