Strengthening the Foundation: On the Index of Core Industries

The Index of Core Industries (ICI) has finally caught up with India's other key economic indicators, offering a more current and accurate reflection of the economy. Earlier this year, metrics such as the national accounts, the Consumer Price Index (CPI), the Wholesale Price Index (WPI), and the Index of Industrial Production (IIP) were updated, though these improvements also came after substantial delays. Now, the ICI has joined them, with its June data adopting a new series that features an updated base year, the inclusion of an additional sector, and revised weighting and methodologies. This modernization is a welcome development. The performance of these fundamental industries serves as a critical measure of the nation's economic health. Under the new series, the index has expanded from eight to nine sectors, notably incorporating the iron ore industry. Improvements have also been implemented in the way the steel and coal sectors are measured, specifically to eliminate previous instances of double-counting. While the addition of a new sector naturally alters the distribution of weights among the industries within the index, the final weightings also signify a broader evolution in economic activities. For instance, the coal and natural gas sectors have seen their respective weights nearly halved, now standing at approximately 5.6% and 3.8%. Conversely, the electricity sector now accounts for over 30% of the index, a significant increase from less than 20% in the preceding series. This shift likely reflects the growing contribution of renewable sources to electricity generation, even as overall demand for power continues to rise. The index's performance in June 2026, which showed a 5% growth—a five-month high—might suggest that Indian industry is recovering from the downturn caused by the West Asia crisis. However, two of the strongest growth figures, iron ore at 43.9% and electricity at 9.8%, were influenced by a statistical base effect, as both sectors had experienced contractions in June of the previous year. It remains uncertain whether these positive trends will persist once this base effect diminishes in the coming months. The updated series also continues to highlight some systemic challenges observed in the old data, such as the ongoing decline in the crude oil and natural gas sectors. These have experienced continuous contraction for 18 and 24 months, respectively. If India lacks these resources, that is one scenario. But if the country possesses them and yet struggles to extract them economically, then this represents a significant deficiency. The recent update of the ICI, alongside the earlier upgrade of the WPI, presented an opportune moment for a more extensive overhaul of statistical organization. Given that the Ministry of Statistics and Programme Implementation already oversees the CPI and the IIP, it would be logical for the WPI and ICI to transfer from their current jurisdiction under the Ministry of Commerce and Industry to the Ministry of Statistics and Programme Implementation. This organizational adjustment remains a possibility.