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.

As the resolution process of the West Asia crisis drags on, an increasing number of economic metrics are exposing key weaknesses in the Indian economy. Many of these existed before the crisis broke out in late February and are now becoming apparent as the economy faces stress. The latest data on the Index of Eight Core Industries show that these sectors cumulatively grew just 0.5% in May 2026, the second-lowest in 21 months. It would have been easy to pass this off as a war-related impact, but the data also show that the index grew by an almost equally anaemic 1.1% over the course of the entire financial year 2025-26. What remains a concern is that the domestic crude oil and natural gas sectors continued their multi-year streaks of contractions in May as well. By this time, the third month of the conflict, oil prices had settled somewhat lower than their April peaks. As a result, oil imports by oil marketing companies began rising once again to meet domestic demand. A strategic goal continues to be missed here. While imported oil can be used to meet demand, domestic production should nevertheless be ramped up to fill strategic reserves. This reserve oil, even of inferior quality, can be released in times of shortage. The same holds true for natural gas. With natural gas imports and domestic production contracting, it followed that the fertilizer sector would also contract. The good news, however, is that the contraction — of 0.9% in May 2026 — was much lower than it was even two months earlier. In any case, what impact the ‘super El Niño’ will have on fertilizer demand is still uncertain.

Coal production, too, contracted by the most in nearly a year. As the summer continues to heat up, electricity generation will increasingly have to rely on variable renewable sources or costly imported coal. Notably, the core sectors are not the only ones revealing economic distress. The latest Goods and Services Tax (GST) revenue data too show that domestic economic activity seems to be slowing. Revenues from domestic transactions contracted 2.6% in May 2026. The government argues that this is because of a one-time windfall transfer it received in May last year. Even so, the average growth of domestic GST revenue over the last six months was just 3.1%, lower than in 2025-26 and the year before that. This is not a supply issue, since merchandise exports hit a record high in May 2026. It is a demand problem, as low real wage growth meets rising inflation to squeeze wallets. These are all distressing signals even as India enters a deficient monsoon. Trade deals are no substitute for hard-hitting reforms.