Mar-25 core sector grows 3.83%; FY25 growth tapers to 4.44%

22 Apr 2025 , 08:16 AM

FY25 CORE SECTOR SUBDUED, INFRASTRUCTURE SHOWS A BOUNCE

Core sector growth for March 2025 at 3.83% was higher than the February 2025 core sector growth of 3.36% (revised up from 2.85%). There has also been an interesting shift. Effective April 2025, core sector growth will be announced around the 20th of each month, rather than on the last day. That should also help align the IIP announcement better with inflation data, since IIP is today done with a full 1-month lag.

Natural gas output saw a huge fall in March, while the core infrastructure indicators like cement and steel saw a sharp surge. What about revisions? December 2024 core sector final revision saw an upgrade of 31 bps from 4.78% to 5.09%, while the first revision for February 2025 was a 51 bps upgrade from 2.85% to 3.36%.

CORE SECTOR LEADERS AND LAGGARDS IN MARCH 2025

In the 8-infrastructure core sector basket, refinery products has the highest weightage of 28.04%, followed by electricity at 19.85% and steel 17.92%. While Steel showed robust growth at 7.14%, electricity was also steady at 6.22%, but refinery products was almost flat at 0.20% for second month in a row. For February, Cement at 11.58%, has shown double digit growth for fifth month in a row. Fertilizers was also robust at 8.83%.

For March 2025, the pressure points were the same. The pain, once again, came from crude oil at -1.90% and natural gas at -12.74%. In fact, crude oil has contracted in 9 out of the last 10 months, while natural gas has contracted for last 9 months in a row. Both, Crude oil, and Natural Gas have contracted on an average in last 12 months. In terms of infrastructure signals; cement has averaged 6.25% growth and Steel 6.69% in last 1 year.

BREAKING DOWN THE MARCH 2025 CORE SECTOR GROWTH

The table captures the breakdown of the +3.83% yoy core sector growth for March 2025 across 8 major baskets. The figures for December 2024 and February 2025, represent the figures after the final revision and the first revision respectively.

Months	Overall (%)	Coal (%)	Crude (%)	Natural Gas (%)	Refinery (%)	Fertilizers  (%)	Steel  (%)	Cement (%)	Electricity  (%)
Mar-24	6.25	8.70	2.07	6.30	1.59	-1.27	7.53	10.58	8.62
Apr-24	6.94	7.51	1.73	8.56	3.92	-0.76	9.83	0.16	10.24
May-24	6.86	10.20	-1.14	7.51	0.50	-1.66	8.94	-0.63	13.74
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	14.62	2.38
Feb-25	3.36	1.65	-5.17	-6.04	0.75	10.24	6.85	10.76	3.63
Mar-25	3.83	1.64	-1.90	-12.74	0.20	8.83	7.14	11.58	6.22

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

Let us look at some of the key performers and pressure points. On the downside, natural gas and oil exploration continued to witness contraction; and that has been the trend for the last one year due to a sort of policy paralysis on hydrocarbons. While cement sustained double-digit growth for fifth month in a row, fertilizers and electricity were also robust. However, subdued capex investment support from the government is taking its toll.

HIGH FREQUENCY CORE SECTOR GROWTH (MARCH 2025)

While the regular yoy growth captures long term trends, it is quite sensitive to the base effect. High frequency MOM data captures the short term trends in core sector.

Core Sector Component	Weight	Mar-25 (YOY) %	Mar-25 (MOM) %	FY25 Cumulative (%) #
Coal	10.3335	+1.64%	+20.69%	+5.09%
Crude Oil	8.9833	-1.90%	+11.05%	-2.20%
Natural Gas	6.8768	-12.74%	-1.14%	-1.17%
Refinery Products	28.0376	+0.20%	+10.34%	+2.80%
Fertilizers	2.6276	+8.83%	+1.60%	+2.85%
Steel	17.9166	+7.14%	+8.63%	+6.69%
Cement	5.3720	+11.58%	+13.75%	+6.30%
Electricity	19.8530	+6.22%	+11.80%	+5.09%
Core Sector Growth	100.0000	+3.83%	+11.47%	+4.44%

Data Source: DPIIT (# FY25 is 12-months data)

While high-frequency growth was negative in January and February, we have seen a sharp turnaround in MOM growth in March at 11.47%. In March 2025, a total of 7 out 8 sectors saw positive MOM growth; with only natural gas output contracting -1.14% MOM. In fact, the MOM expansion has been in double digits for coal, crude oil, refinery products, cement, and electricity. It is indicative of the gradual return of momentum in the core sector output in the month of March 2025, although it could be partially due to the year-end effect.

CHARTING LONG TERM STORY OF CORE SECTOR GROWTH

How was core sector from a longer term perspective? Of course, the figures for Jan-25, Feb-25, and Mar-25 are provisional figures and subject to change. The cumulative core sector growth for FY25 has been stable at 4.44%. However, if you compare with previous years, the FY25 core sector growth is sharply lower compared to 7.61% in FY24, 7.80% in FY23, and 10.41% in FY22, albeit on a much higher base!

If one looks at the average core sector growth of the 13 previous full fiscal years, it stands at 4.0%.  However, if the COVID year (FY21) is removed, the average stands at 4.9%. While there are signals of getting over the capex slowdown, the overall capex outlay hardly appears to have grown in the last two fiscal years. That may be the real dampener!