Index of Eight Core Industries (ICI)

The Index of Eight Core Industries (ICI) is the backbone indicator of India’s industrial health. Recently, the Index of Eight Core Industries (ICI) remained unchanged at 162.4 in October 2025, the same as in October 2024, indicating stagnation in output in India’s key industrial sectors. Read here to learn more.

The Index of Eight Core Industries (ICI) is one of India’s most critical high-frequency macroeconomic indicators. Often referred to as the “industrial pulse of the economy,” the ICI monitors output across eight infrastructure-intensive sectors that form the foundation of industrial growth.

Movements in the index, whether expansion or stagnation, signal deeper trends in manufacturing, infrastructure creation, energy consumption, and broader economic momentum.

India’s eight core industries together account for 40.27% of the Index of Industrial Production (IIP), underscoring their centrality in supporting supply chains, industrial production, and overall GDP performance.

What is the Index of Eight Core Industries (ICI)?

The ICI is a production-volume index that measures monthly changes in output in eight core industries:

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1. Coal
2. Crude Oil
3. Natural Gas
4. Refinery Products
5. Fertilizers
6. Steel
7. Cement
8. Electricity

These sectors are termed “core” because they supply essential inputs, energy, materials, and infrastructure necessities, to virtually every major industry.

Their performance is therefore a proxy for industrial health and economic momentum.

Compiling Agency

The Index of Eight Core Industries is compiled and released by the Office of the Economic Adviser (OEA) under the Ministry of Commerce and Industry.

Base Year: The index uses 2011-12 as the base year, harmonised with the IIP.

Why These Eight Industries Matter

These industries form the building blocks of economic activity:

• Coal, crude oil, natural gas, and electricity supply energy for households and industries.
• Steel and cement fuel construction, real estate, and infrastructure development.
• Refinery products power transportation and industrial machinery.
• Fertilizers directly influence agricultural productivity and food security.

Together, they influence inflation, manufacturing competitiveness, employment generation, and government capital expenditure planning.

Weightage Distribution within the ICI

The relative importance of the eight industries is reflected in their weights:

Fertilizers < Cement < Natural Gas < Crude Oil < Coal < Steel < Electricity < Refinery Products

• Refinery Products (28% approx.) have the highest weight due to their extensive industrial usage.
• Fertilizers (~2.6%) have the lowest weight because their output is seasonal and relatively limited compared to heavy industries.

How the Index of Eight Core Industries is Calculated

The index measures change in production quantities, using a fixed-weight formula similar to the IIP.

Methodology:

• It uses a Laspeyres-type volume index, a standard method for price and output indices.
• Production data is collected monthly from ministries, PSUs, and private sector associations.
• These are compared against the base-year output levels to calculate the index value.

The index reflects real production changes, not changes in nominal value, making it a robust indicator of actual industrial activity.

Relationship Between ICI and IIP

The ICI is a major component of the IIP, carrying 40.27% of its total weight.

This means:

• A rise in core industries usually lifts overall industrial production.
• Conversely, stagnation or decline in core output often signals a broader industrial slowdown.

Thus, the ICI is a reliable leading indicator of the IIP and overall economic activity.

Sectoral Significance of Each Core Industry

1. Coal: The primary energy source for India’s thermal power plants. It is vital for electricity generation and metallurgy.
2. Crude Oil: A major input for refineries, petrochemicals, plastics, and transportation fuels.
3. Natural Gas: Used in power generation, fertilizers, and industrial heating.
4. Refinery Products: Includes petrol, diesel, ATF, LPG, essential for transportation and manufacturing.
5. Fertilizers: Crucial for agriculture, particularly during rabi and kharif sowing cycles.
6. Steel: Fundamental to construction, automobiles, and capital goods manufacturing.
7. Cement: Directly linked to infrastructure, roads, housing, and real estate.
8. Electricity: A proxy for overall economic activity; higher consumption correlates with industrial expansion.

Why the Index of Eight Core Industries Matters for Policymaking

1. GDP Forecasting

Core industries are early indicators of industrial output, helping forecast:

• Quarterly GDP growth
• Corporate earnings
• Infrastructure investment trends

2. Fiscal & Infrastructure Planning

ICI trends influence:

• Government capex decisions
• Steel/cement demand planning
• Energy security assessments

3. Inflation Monitoring

Changes in coal, electricity, and refinery products often translate into:

• Fuel inflation
• Wholesale price index fluctuations

4. Private Investment Decisions

Companies track ICI performance to decide:

• Expansion plans
• Capital expenditure
• Sectoral investment priorities

In news

In October 2025, the ICI remained unchanged at 162.4, signalling stagnation in core sector growth. Such stagnation often means:

• Slower industrial activity
• Stress on energy-intensive sectors
• Weak demand for construction materials

Flat core sector performance can also drag down IIP figures in subsequent months.

Limitations of the Index of Eight Core Industries

While robust, the ICI has challenges:

1. Covers only eight industries and may not accurately reflect broader industrial diversification.
2. Heavy weightage of refinery products can distort overall performance.
3. Excludes renewable energy output, an increasingly significant sector.
4. Does not capture services, now the largest part of India’s GDP.
5. Relies on self-reported industry data, subject to reporting delays or inconsistencies.

Conclusion

The Index of Eight Core Industries stands as a critical tool for understanding the trajectory of India’s industrial and economic landscape.

As a high-frequency indicator, it offers immediate insights into the performance of vital sectors that support infrastructure, energy availability, and manufacturing growth.

For policymakers, economists, and UPSC aspirants alike, the ICI is not just a monthly number but a strategic barometer reflecting the health, momentum, and direction of the Indian economy.