Core upgrade: On the Index of Core Industries

Why in the News?

The Index of Core Industries (ICI) has been rebased and restructured, joining the Consumer Price Index (CPI), Wholesale Price Index (WPI), Index of Industrial Production (IIP) and national accounts in India’s overdue statistical modernisation cycle. The revised series adds a ninth sector, sharply changes sector weights, and reports a five-month-high growth rate for June 2026. The update, however, exposes a real production shortfall that better statistics cannot fix, and leaves an institutional anomaly in the compilation of core economic indices unresolved.

What is the Index of Core Industries (ICI)?

1. Definition: The Index of Core Industries (ICI) is a monthly production volume index released by the Office of Economic Adviser on the DPIIT Portal that measures the output of key foundational infrastructure sectors in India
2. Predictor of industrial performance: It acts as an early predictor of overall industrial performance well ahead of the broader Index of Industrial Production (IIP) release.
3. Revised base year: The base year has shifted from 2011-12 to 2022-23 to reflect current economic realities.

What does the revised Index of Core Industries change, and why now?

1. New base year and coverage: The ICI has been rebased (2022-23) and now covers nine sectors instead of eight, with iron ore added as the ninth sector.
2. Correction of double-counting: The measurement of the steel and coal sectors has been revised to remove double-counting present in the earlier series. Only Raw Coal has been retained in the new series of ICI, by excluding Coal Middling and Washed Coal in order to remove double counting, since Coal Middling and Washed Coal are made from Raw Coal.
3. Reweighting toward electricity: The electricity sector’s weight has risen to more than 30% of the index from less than 20% in the previous series.
4. Reweighting away from fossil fuels: The coal and natural gas sectors have had their weights nearly halved, to about 5.6% and 3.8% respectively.
5. Delayed catch-up/Alignment with other Index: The revision aligns the ICI with recent updates to the CPI, WPI, IIP, and National Accounts. Following the earlier practice, the weights of the ICI (2022-23) series have been derived from the weights of the corresponding items of IIP (2022-23) series, which have been pro-rata distributed to 100.

Does the headline growth number reflect genuine industrial strength or a statistical mirage?

1. Five-month-high growth: The new series recorded ICI growth of 5% in June 2026.
2. Base-effect distortion: Iron ore output grew 43.9% and electricity output grew 9.8% in June 2026, but both figures reflect a statistical base effect, since both sectors had contracted in June 2025.
3. Uncertain durability: It remains unclear whether current growth rates will hold once the base effect wears off in coming months.
4. Persistent contraction underneath: The crude oil sector has contracted continuously for 18 months and the natural gas sector for 24 months, a real supply-side weakness the new series does not resolve.
5. The deeper shortcoming: This is a serious shortcoming if India possesses these resources but cannot extract them economically, rather than a case of resource absence.

Should ICI and WPI be compiled by MoSPI?

1. The Ministry of Statistics and Programme Implementation (MoSPI) already compiles the Consumer Price Index (CPI) and the Index of Industrial Production (IIP).
2. However, the Index of Core Industries (ICI) and the Wholesale Price Index (WPI) continue to be compiled by the Ministry of Commerce and Industry.
3. Methodological Harmonization: ICI weights are derived directly from the IIP basket managed by MoSPI. Unifying them under one roof prevents administrative friction during base-year overhauls and weight redistributions.
4. Streamlined Deflators: WPI and output-based producer price metrics are heavily relied upon to deflate nominal macroeconomic numbers like Gross Domestic Product (GDP) and IIP. Moving price and production tracking to the nodal statistical ministry improves synchronization.
5. Institutional Credibility: Centralizing macro data collection reduces inter-ministerial silos, creating a single unified command for official national statistics.
6. Domain Expertise: The Ministry of Commerce and Industry works closely with industrial stakeholders, trade bodies, and sector-specific experts (like DPIIT), which helps in real-time ground tracking of wholesale prices and core output.

Conclusion

The revised Index of Core Industries brings India’s oldest industrial data series current, with a new base year, a ninth sector and reweighted components. But June 2026’s five-month-high growth figure is partly a statistical base effect masking continuous contraction in crude oil and natural gas output. What remains unresolved is not measurement but extraction capability, along with an institutional anomaly by which the WPI and the ICI still sit outside MoSPI, unlike the CPI and the IIP.