Canary in coal mine

Why in the News

Growth in the Index of Core Industries (ICI) rose to a series-high of 7.9% in September 2026, the second straight month of faster growth. The editorial reads it as a warning, because the drivers are temporary or import-heavy and the government’s fiscal space (room to spend without unsafe borrowing) is shrinking.

Is the record core sector reading a real recovery?

1. What the index shows: The ICI tracks monthly output of the basic industries that supply fuel, power and building material. It works like a pulse reading for industry, since most goods need these inputs.
2. Coal spike: Coal growth shot up to 10.7% in September. Over the longer April to September period, coal output still shrank by 1.1%.
3. Cause of the spike: The jump is a temporary blip, aided by a low base (weak output a year earlier) and by power plants pressing for coal as stocks ran down in the heat wave.
4. The takeaway: A record built on a one-off coal surge says little about whether industry will keep growing.

Which sectors will not sustain the pickup?

1. Electricity: Power output grew 11.4% in September, capping a half-year of double-digit growth. Power plants will need less coal ahead, because the El Niño effect (a periodic Pacific warming) behind the heat wave also brings a milder winter.
2. Steel: Steel mills, the other heavy users of coal, grew faster in September. Their extra demand is still too small to keep coal output at September’s level.
3. Iron ore: The steel uptick returned iron ore to double-digit growth, which helps the mining component of the wider Index of Industrial Production (IIP).

Why does refinery growth point to a fiscal problem?

1. Falling domestic output: Crude oil and natural gas output have contracted continuously since 2024, yet refinery output rose 10.3% in September. So refineries were processing more expensive imported oil.
2. Import bill: Oil imports in September rose 7% by volume but 47% by value. India paid far more for a little more oil, because prices are high.
3. Price shock: Attacks on Saudi Arabia’s energy infrastructure have pushed global oil above $112 a barrel, almost a six-month high, so the import bill is set to worsen.
4. End of discounts: A United States reprieve on potential tariffs linked to Russian oil keeps Russia a reliable supplier, but Russian oil no longer comes at a discount.
5. Reserve drain: Each imported barrel eats into India’s foreign exchange reserves, which are also being used to defend the rupee.

Can government spending keep industry growing?

1. Only steady sectors: Cement and steel are the only core sectors growing sustainably, and both rest on government infrastructure spending.
2. Shrinking room: Industrial output is only temporarily propped up. The government’s fiscal space is shrinking fast, so public spending cannot carry industry for long.

Challenges

1. Import dependence: India imports most of the crude it refines, so faster refinery growth widens the import bill instead of cutting it.
2. Thin reserve cushion: Reserves spent defending the rupee leave less room to absorb a further oil price rise.
3. Reliance on public capital spending: Growth led by government construction stalls when fiscal space shrinks, unless private investment takes over.

Way Forward

1. Domestic exploration: The Ministry of Petroleum and Natural Gas should speed up award of blocks under the Open Acreage Licensing Policy (OALP), where companies pick the areas they bid for, to arrest falling crude and gas output.
2. Supplier spread: Oil companies should spread crude purchases across suppliers so that one supply shock does not set the import bill.
3. Private investment: The Centre should draw private capital into infrastructure so that growth does not rest on public spending alone.

Conclusion

India’s industrial pickup rests on a temporary coal and power surge and on public construction, and costlier oil imports are draining the reserves. Whether private demand and domestic energy output can take over before public spending runs out of room is unresolved.

Back2Basics: Index of Core Industries (ICI)

1. What it measures: Monthly output of nine core industries: coal, crude oil, natural gas, refinery products, fertilisers, steel, iron ore, cement and electricity.
2. Compiled by: The Office of the Economic Adviser in the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry.
3. New series: The new series uses 2022-23 as its base year, replacing 2011-12, and added iron ore as the ninth sector.
4. Link with the IIP: The core industries are also part of the IIP, which the Ministry of Statistics and Programme Implementation compiles.

Matching Previous Year Question

“[2012] In India the overall Index of Industrial Production, the Indices of Eight Core Industries have combined weight of 37.90%. Which of the following are among those Eight Core Industries? 1. Cement 2. Fertilizers 3. Natural Gas 4. Refinery products 5. Textiles Select the correct answer using the code given below: (a) 1 and 5 only (b) 2, 3 and 4 only (c) 1, 2, 3 and 4 only (d) 1, 2, 3, 4 and 5 ANSWER: (c)”