New Delhi: India’s core infrastructure sector expanded 4% year-on-year in January, slowing from a revised 4.7% expansion in December, as weak oil and gas output limited gains in construction-related segments.
A composite index of eight key industries stood at 180.8 in January 2026, up from 173.8 a year earlier and 177.3 in December, provisional data released by the Department of Trade and Industry showed on Friday. This suggests a gradual improvement despite a more moderate annual growth rate.
Eight major sectors – coal, oil, natural gas, refined products, fertilizers, steel, cement and electricity – together account for 40.27% of the index of industrial production (IIP), underscoring their direct influence on overall industrial growth.
On a cumulative basis, growth in the key sector during April-January FY26 was 2.8% y-o-y, reflecting a sharp divergence between the infrastructure-based and power mining segments.
Across sectors, steel production rose 9.9% year-on-year in January, while cement production rose 10.7%, signaling continued activity in housing and infrastructure projects.
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Fertilizer production increased by 3.7% during the month, coal production increased by 3.1% and electricity production increased by 3.8%, pointing to stable agricultural and energy demand in January.
Fertilizer production was largely driven by rabi crop sowing, while higher electricity generation reflected stable industrial and household consumption. Growth in coal production suggests continued demand from thermal power plants, although the pace has remained moderate.
However, oil production decreased by 5.8% year-on-year in January, and natural gas production by 5%. Refinery products did not show any growth compared to the previous year.
Hydrocarbon resistance remains visible even in cumulative data. During April-January of FY26, oil production fell 2.1%, natural gas production fell 3.4%, and coal production fell slightly by 0.3%. In contrast, steel production rose 9.8% and cement production rose 9.1%, dampening the overall index.
A diverging trend
The latest data points to a clear divergence within the main sector, with construction-related industries supporting growth even as energy production remains under pressure, according to economists.
“The data shows that construction activity is supporting industrial growth, while oil and gas production remains weak,” said Abhash Kumar, assistant professor of economics at Delhi University. “As major sectors have a direct impact on IIP, the January numbers suggest that overall industrial growth may remain steady, but remains exposed to continued weakness in oil and gas production.”
According to the ministry, the January numbers are provisional and subject to revision as they receive updated data from source agencies. The index for February 2026 will be published on March 20.
Broader industrial activity in the country has recently shown signs of strain in key sectors, although overall factory output rebounded strongly at the end of 2025. India’s industrial production accelerated sharply to 7.8% in December, the fastest expansion in more than two years, after a strong 6.7% rise in November, government data showed. This suggests that while some major inputs remain weak, other parts of the industrial ecosystem have regained strength.
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The official Index of Industrial Production (IIP) data for January is scheduled to be released on March 2, 2026, according to the Ministry of Statistics and Program Implementation.
Private surveys suggest that production momentum has picked up recently after cooling off late last year. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) – a forward-looking gauge of factory activity – rose to 57.5 in February 2026 from 55.4 in January, signaling a strong expansion and marking a four-month high for factory growth. A PMI reading above 50 indicates expansion in the manufacturing sector.
The strain on industrial activity also coincided with external pressures, with Indian goods facing tariffs of up to 50% in the US. As a result, exports to the US fell to $6.58 billion in January from $7.01 billion in December, suggesting some moderation in shipments despite continued resilience under higher tariff conditions. Exporters faced price and margin pressures during the period of increased tariffs, particularly in sectors such as textiles, jewelery and engineering goods.
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However, the US administration offered some relief and withdrew the additional 25% punitive duty imposed on February 6 on India’s purchases of Russian oil. The US also agreed to reduce the 25% reciprocal tariff to 18% and an interim agreement is expected to be signed soon.
Cumulative shipments to the U.S. between April and January rose 5.8% year-on-year to $72.46 billion, reflecting steady growth despite uncertainty over tariffs, Commerce Department data showed.
Bilateral merchandise trade between India and the US reached $116.39 billion during April-January, with India posting a trade surplus of $28.53 billion. In the corresponding period of the previous fiscal year, total trade was $112.51 billion with a trade surplus of $27.41 billion.