Page 33 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

The cumulative performance during the first four months of FY 2026–27 remained encouraging. The ICI
grew by 4.3 per cent during April–July 2026, compared with only 1.5 per cent during the corresponding
period of the previous year. The cumulative improvement was supported particularly by Iron Ore, Cement
and Electricity, which recorded growth of 25.2 per cent, 9.9 per cent and 9.3 per cent,
respectively. Steel also expanded by 4.5 per cent, while the remaining sectors recorded contractions over
the April–July period, including Fertilizers (-5.2 per cent), Natural Gas (-4.4 per cent), Crude Oil (-4.3 per
cent), Refinery Products (-2.5 per cent) and Coal (-3.1 per cent).

The July data also provide an indication of the continuing importance of infrastructure-linked sectors to
India's industrial momentum. Electricity carries the highest weight in the revised ICI at 30.932 per cent,
followed by Refinery Products at 22.572 per cent and Steel at 17.584 per cent, while Coal, Crude Oil, Iron
Ore, Cement, Natural Gas and Fertilizers account for the remaining weight. The inclusion of Iron Ore in
the revised series with the 2022–23 base year provides greater representation of its contribution to
industrial activity.

Overall, the July 2026 ICI data point to continued strengthening of India's underlying industrial activity,
with the sharp expansion in Iron Ore, Cement and Electricity providing significant support to the core
sector. While contractions in natural gas, crude oil and fertilizers indicate pockets of weakness, the
substantially higher cumulative growth compared with the previous year suggests that the industrial
recovery remains on a firmer footing. Continued performance of infrastructure-linked sectors, electricity
generation and manufacturing inputs will remain important for sustaining industrial momentum during
the remainder of FY 2026–27.

6. S&P Global Ratings Affirms India’s ‘BBB’ Sovereign Rating with Stable Outlook

S&P Global Ratings has affirmed India's 'BBB' long-term and 'A-2' short-term sovereign credit ratings,
maintaining a stable outlook on the country's long-term rating. The assessment reflects S&P's view that
India's strong and dynamic economy, sound external position, stable institutions and continued policy
support will sustain robust economic growth over the medium term. At the same time, elevated
government debt and relatively weak fiscal performance remain important constraints on India's
sovereign credit profile.

S&P expects India's economic growth to moderate from the exceptionally strong performance recorded
in FY2025–26. Real GDP growth reached 7.7 per cent in FY2025–26, but is projected to slow to 6.6 per
cent in FY2026–27, primarily due to the impact of higher energy prices and challenging agricultural
conditions. Despite this moderation, India is expected to remain one of the better-performing major
economies, with real GDP growth projected to average 7.0 per cent over the following three years.

The agency expects domestic consumption and public investment to remain the principal pillars of
growth. Higher capital expenditure by the central government and, to some extent, state governments is
expected to support investment and construction activity. The Union Government's capital expenditure
allocation for FY2026–27 is equivalent to approximately 3.2 per cent of GDP, while total capital outlay
including related spending by states, grants and public enterprises is projected at 5.6 per cent of GDP,

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