India's eight core infrastructure sectors expanded by 3.7 per cent year-on-year in December 2025, marking a four-month high that signals a tentative acceleration in industrial momentum during the final month of the calendar year.

This recovery, documented by the Index of Eight Core Industries (ICI) which tracks coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, represents a meaningful pickup from November's revised growth rate of 2.1 per cent, though it remains well below the 5.1 per cent expansion recorded in December 2024.

The deceleration on a year-on-year basis reflects the softer underlying trajectory of industrial activity when measured against comparable periods, yet the sequential improvement from the preceding month provides evidence of a modest but discernible firming in economic activity as the fiscal year draws toward its conclusion.

The recovery in December was heavily concentrated within construction and infrastructure-linked sectors, which have emerged as the dominant drivers of industrial growth throughout the current fiscal year.

Cement production surged 13.5 per cent, representing the highest sectoral growth within the core industries and reflecting sustained momentum in housing, infrastructure and public works projects. This exceptional performance is underpinned by major government initiatives including the Pradhan Mantri Awas Yojana (housing for all programme) and the Gati Shakti Master Plan, which continue to channel substantial investment into capital formation across the economy.

Steel output similarly demonstrated resilience, rising 6.9 per cent during the month and reinforcing signals of sustained demand from construction and capital goods segments. Together, these two sectors have accounted for the overwhelming majority of the core sector's cumulative growth, with steel and cement registering cumulative advances of 9.5 and 8.8 per cent respectively during the nine-month period from April to December 2025-26.

Electricity generation increased by 5.3 per cent in December, pointing to steady industrial and commercial power demand that continues to support production across manufacturing sectors. This expansion, which includes output from renewable sources under the revised methodology adopted from April 2014 onwards, indicates sustained consumption pressures despite moderate economic growth. 

Fertiliser output expanded 4.1 per cent, supported by seasonal agricultural requirements that typically peak during this period of the financial year. Coal production grew 3.6 per cent, aiding both power generation and steelmaking operations, though its performance over the full financial year remains mixed with cumulative output declining 0.7 per cent relative to the corresponding nine-month period in the prior fiscal year. In aggregate, five of the eight core sectors—coal, fertilisers, steel, cement and electricity—posted positive growth in December, collectively lifting the headline index despite significant headwinds emanating from the energy complex.

The resilience displayed by construction and electricity-linked sectors masks profound structural weaknesses persisting within India's hydrocarbon and upstream energy production. Crude oil production contracted sharply by 5.6 per cent year-on-year in December, continuing a protracted decline that reflects challenging geology, ageing producing fields and limited success in bringing new output additions into production. 

The December rebound in core industries must be contextualised within these broader currents affecting India's industrial activity. Whilst the 3.7 per cent growth provides some reassurance regarding construction sector health and domestic demand resilience, the persistent weakness in energy production and the uneven nature of sectoral recovery underscore emerging structural challenges that will require policy attention.

The government's continued emphasis on infrastructure development and housing provision has successfully sustained demand in cement, steel and related industries, but this has not been sufficient to offset the drag from energy sectors or to prevent the nine-month cumulative growth rate from falling to just 2.6 per cent.

As India's fiscal year concludes in March 2026 and the government prepares its next budget, policymakers will need to grapple with the dual imperatives of sustaining the construction-led recovery whilst addressing the structural challenges limiting domestic energy production and consequently raising energy import dependency to record levels.