Jun-25 core sector recovers to 1.71%; Cement and Steel shine

22 Jul 2025 , 10:25 AM

JUNE CORE SECTOR BOUNCES, BUT Q1 SUBDUED AT 1.34%

Core sector growth for June 2025 at 1.71% may be lower than the average of the last few quarters, but it has shown a progressive bounce over April and May. Incidentally, May 2025 core sector growth was upgraded (first revision) by 48 basis points from 0.71% to 1.19%. However, the core sector stayed under 2% in all the 3 months of the June quarter, resulting in tepid quarterly growth of just 1.34%. Once again, the big drivers of core sector growth came from cement and steel. The positive growth in refinery products got magnified due to its weight. However, coal output suffered sharply due to prolonged monsoons.

CORE SECTOR LEADERS AND LAGGARDS IN JUNE 2025

A total of 5 out of the 8 core sectors saw contraction in June 2024. In the core sector basket, refinery products has the highest weightage of 28.04%, followed by electricity at 19.85% and steel 17.92%. Of these 3 sectors, electricity saw contraction of -2.78%. However, Steel grew 9.26%, while refining grew 3.36% in June 2025. Cement continued to show smart traction in May at 9.17% hinting at a boost to construction. Apart from electricity, the other 4 sectors to see contraction in June 2025 were Coal -6.81%, Natural Gas -2.77%, crude extraction -1.21% and Fertilizers -1.19%. Supply chain challenges are exerting pressure.

BREAKING DOWN JUNE 2025 CORE SECTOR GROWTH

The table captures breakdown of the +1.71% yoy core sector growth for June 2025 across 8 infrastructure baskets. Previous data points have been revised, appropriately.

Months	Overall (%)	Coal (%)	Crude (%)	Natural Gas (%)	Refinery (%)	Fertilizers  (%)	Steel  (%)	Cement (%)	Electricity  (%)
Jun-24	5.00	14.78	-2.62	3.27	-1.54	2.45	6.31	1.79	8.58
Jul-24	6.27	6.82	-2.92	-1.27	6.62	5.31	6.99	5.12	7.94
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	14.30	2.30
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	1.71	-6.81	-1.21	-2.77	3.36	-1.19	9.26	9.17	-2.78

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, natural gas, and fertilizers were hit by supply chain issues, as well as policy constraints. Coal output contracted -6.81% due to monsoons, leading to electricity contracting -2.78% in the June 2025. On the upside solid traction in steel and cement can be attributed to a sharp revival in construction demand. However, the big boost came from refinery products output bouncing 3.36% on the back of better GRMs. Out of the 8 core sectors, in the case of refinery products, steel, and cement; June 2025 output is better than the average of last 12 months. In all other cases, it is flat to lower.

HIGH FREQUENCY CORE SECTOR GROWTH (JUNE 2025)

While regular yoy growth captures long-term trends, high frequency MOM data captures short term trends in core sector.

Core Sector Component	Weight	Jun-25 (YOY) %	Jun-25 (MOM) %	FY26 Cumulative (%) #
Coal	10.3335	-6.81%	-8.48%	-0.28%
Crude Oil	8.9833	-1.21%	-3.92%	-1.97%
Natural Gas	6.8768	-2.77%	-2.90%	-2.48%
Refinery Products	28.0376	+3.36%	-3.28%	0.00%
Fertilizers	2.6276	-1.19%	+3.52%	-3.79%
Steel	17.9166	+9.25%	-1.07%	+7.02%
Cement	5.3720	+9.17%	+3.68%	+8.41%
Electricity	19.8530	-2.78%	-0.87%	-2.03%
Core Sector Growth	100.0000	+1.71%	-2.17%	+1.34%

Data Source: DPIIT (# Apr-Jun data)

The high frequency MOM core sector growth contracted -11.25% in April, but expanded by 3.74% in May 2025. In June, the MOM contraction of -2.17% shows pressure in the short term. Only 2 out of the 8 items in the core sector basket (fertilizers and cement) showed positive high frequency momentum. In all other cases, it was negative, with the MOM contraction in Coal being deep in the negative due to prolonged monsoons.

CHARTING LONG TERM STORY OF CORE SECTOR GROWTH

The cumulative core sector growth in Q1FY26 stood at a tepid 1.34%. This is sharply lower than the growth of 6.2% in Q1FY25 and 6.1% in Q1FY24! High base effect is only part of the answer. The real reason is the absence of private sector 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%. The Q1FY26 core sector growth at 1.34% leaves a lot to be desired; and the message is clear. There must be clear incentives for the private sector to invest and the capex has to now come from the private sector only.