​Core upgrade: On the Index of Core Industries

The Index of Core Industries (ICI) has finally joined the country’s other economic metrics in becoming up-to-date and representative of the economy. The other metrics such as the national accounts, Consumer Price Index (CPI), Wholesale Price Index (WPI), and the Index of Industrial Production (IIP) were updated earlier this year, although even those were after considerable delays. The ICI has now joined their ranks with the June data being based on a new series with an updated base year, an additional sector being covered, and revised weights and methodologies. This is a welcome upgrade. The performance of these core industries is a vital barometer of the state of the economy. In the new series, the previous eight sectors have become nine, with the vital inclusion of the iron ore sector. Improvements have also been made to how the steel and coal sectors are measured in order to remove the previous double-counting that was taking place. The addition of a sector would naturally change the distribution of weights of the sectors in the index, but the final weights also reflect a broader shift in economic activity. The coal and natural gas sectors have seen their weights nearly halve to about 5.6% and 3.8%, respectively. On the other hand, the electricity sector now makes up more than 30% of the index from less than 20% in the previous series. All of this perhaps reflects the rising share of renewables in electricity generation, even as demand for electricity itself surges.

The performance of the index in June 2026, with a five-month-high growth of 5%, would suggest that Indian industry is shrugging off the slump induced by the West Asia crisis. However, two of the strong growth numbers — iron ore by 43.9% and electricity by 9.8% — were due to a statistical base effect since both sectors had contracted in June last year. It remains to be seen whether the numbers will remain this positive once that base effect wears off in the months ahead. The new series highlights some of the systemic issues that the old series did, such as the persistent contraction of the crude oil and natural gas sectors. They have contracted continuously for 18 and 24 months, respectively. If India does not have these resources, that is one thing. But if it has them and still is not able to extract them economically, then that is a serious shortcoming. The update of the ICI and the recent upgrade of the WPI would have been a good time for a broader statistical reorganisation. With the Ministry of Statistics and Programme Implementation handling the CPI and the IIP, it only makes sense for the WPI and ICI to move to it from their current home in the Ministry of Commerce and Industry. That change can still be made.