Core-sector indices are often seen as leading indicators of industrial performance. Critically examine their usefulness and limitations, with reference to base effects and weather-driven demand.

The Index of Core Industries (ICI) is compiled every month by the Office of the Economic Adviser, DPIIT. Since iron ore was added in the 2022-23 series, it tracks nine infrastructure industries [1]. It comes out before the IIP, so it gives an early warning of industrial trends. That warning is reliable only if the headline figure is read together with base effects and weather.

Usefulness as a leading indicator

• Large share of industry: under the 2011-12 series, core industries made up 40.27% of IIP weight. Their trend therefore points to where the IIP is heading [2].
• Comparable weighting: ICI weights are taken from IIP weights, so the two indices stay aligned [3].
• Investment signal: steel, cement and iron ore follow construction and capital spending. Adding iron ore brings upstream mining into the index [1].
• Supply-chain alarm: coal and power data show fuel stress early, which allows timely action on coal dispatch.

Limitations

• Base effects: growth is measured year-on-year, so a weak month last year makes this year's rate look higher. Coal can surge in one month while year-to-date output stays flat. Monthly and cumulative figures must be read together.
• Weather-driven demand: heat waves pushed peak power demand to a record ~256 GW in April 2026, and thermal plants met about two-thirds of it [4]. This demand fades in winter. It does not mean new factories or new investment.
• Restocking bumps: CEA data showed dozens of thermal plants at critical coal stocks in September 2026 [5]. The extra mining that followed was a one-off refill, not lasting demand.
• Weight concentration: refinery products (28.04), electricity (19.85) and steel (17.92) dominated the old basket, so two sectors can swing the headline [2].
• Narrow coverage: most manufacturing, such as textiles, pharmaceuticals and automobiles, lies outside the ICI [2].

Headline ICI ↑ → Which sectors moved? (weights)
             → Low base last year?
             → Cumulative trend agrees?
             → Weather or investment?
             → Durable signal / transient blip

Fig: Four checks before reading a core-sector release

The ICI is a valuable but noisy canary. It shows the direction of industry early, but base effects and El Niño-type weather can make a one-month blip look like a boom. Three steps would make it more useful for evidence-based policy and for SDG 9's goal of resilient infrastructure:

• reading steel, cement and iron ore as the core signal of investment
• pairing each release with weather-adjusted analysis
• tying coal-stocking norms to climate forecasts