India’s IIP growth hits 23-month high of 7.3% in June

India’s factory output measured by the Index of Industrial Production (IIP) accelerated sharply in June, with factory output expanding at its fastest pace in nearly two years, supported by robust growth in manufacturing, capital goods, electricity generation and infrastructure-related sectors, indicating that domestic industrial demand remains resilient despite persistent global economic uncertainties. The broad-based strength was seen in manufacturing, capital goods and infrastructure-related industries, signalling sustained momentum in the country’s industrial sector despite a challenging global economic environment.

The Index of Industrial Production (IIP) expanded 7.3 percent year-on-year in June 2026, significantly higher than market expectations of around 6 percent and well above the revised growth rate of 5.1 percent recorded in May. The latest reading represents the strongest pace of industrial expansion since July 2024, reflecting improving domestic demand, rising investment activity and healthy production across key sectors of the economy.

According to data released by the Ministry of Statistics and Programme Implementation (MoSPI), the overall IIP index stood at 123.1 in June 2026 compared with 114.7 in the corresponding month of the previous year. The ministry data showed that the three largest contributors to June's industrial growth under the use-based classification were intermediate goods, primary goods and capital goods, highlighting the broad participation of industrial segments in the overall expansion.



Manufacturing drives growth
Manufacturing, which accounts for the largest share of the industrial production index, remained the principal growth engine during the month. The sector expanded 7.8 percent year-on-year, contributing the largest share to overall industrial growth as production increased across a wide range of industries. Out of the 23 manufacturing industry groups classified under the National Industrial Classification (NIC), as many as 19 registered positive growth during June, highlighting the broad-based nature of the industrial recovery.

Among manufacturing industries, electrical equipment emerged as the fastest-growing segment with an impressive 34 percent increase over the previous year. The expansion was led by strong production of electrical apparatus used for switching and protecting electrical circuits, including switchgear, circuit breakers, control panels, uninterrupted power supply (UPS) systems, solid-state drives and optical fibre connectors.

Sector-wise performance
The automobile industry also continued to perform strongly. Production in the manufacture of motor vehicles, trailers and semi-trailers rose 17.5 percent during the month, supported by higher output of passenger vehicles, commercial vehicles, auto components and spare parts, indicating sustained demand from both domestic and commercial transport markets.

Food processing remained another important contributor to industrial growth. Output from the manufacture of food products increased 10.8 percent year-on-year, with higher production of tea, non-basmati rice and starch products helping lift overall manufacturing activity. Electricity and gas supply recorded the strongest sectoral performance among the four major industrial sectors, registering a robust 10.6 percent annual growth in June. The increase reflects higher power consumption by industries, commercial establishments and households amid expanding economic activity and seasonal demand.

Meanwhile, the mining and quarrying sector posted relatively modest growth of 1 percent during the month, indicating slower expansion in extraction activities compared with manufacturing. Water supply, sewerage and waste management services registered a healthy 6.1 percent increase, contributing positively to overall industrial output.

Allied activities remain strong
The use-based classification of industrial production also pointed towards improving investment and infrastructure activity. Capital goods output, widely regarded as an indicator of future investment and industrial capacity creation, recorded a sharp 14.2 percent increase over June last year. The corresponding index stood at 140.5, underscoring continued capital expenditure by both the public and private sectors.

Intermediate goods production rose 9.3 percent, suggesting sustained demand from downstream manufacturing industries and reflecting improving supply chain activity. Infrastructure and construction goods expanded 7.5 percent, supported by ongoing government infrastructure projects and healthy construction activity across the country.

Primary goods registered growth of 4.9 percent, while consumer durables recorded an encouraging 7.7 percent expansion, indicating continued consumer spending on products such as household appliances, electronics and automobiles. Consumer non-durables also increased 4.9 percent, reflecting stable demand for essential goods.

Government support
The encouraging June performance comes amid continued government emphasis on manufacturing-led economic growth through initiatives such as the Production Linked Incentive (PLI) scheme, higher public infrastructure spending and efforts to strengthen domestic supply chains. Rising capacity utilisation across industries and resilient domestic consumption have also supported production growth in recent months. The latest data also indicate that Indian industry has remained relatively insulated from external uncertainties, including slowing global economic growth, geopolitical tensions and volatile commodity prices, owing largely to the strength of domestic demand and public investment.

The ministry noted that the June estimates are based on a weighted response rate of 86.7 percent from reporting factories and establishments. As additional data become available, the figures will be revised in accordance with the established IIP revision policy. The final estimates for May 2026 were compiled with a higher response rate of 93.1 percent. The Quick Estimates of the IIP are compiled every month using production data received from various source agencies covering manufacturing, mining, electricity and other industrial establishments across the country.

Economists believe that sustained growth in manufacturing and capital goods production could provide further support to India's economic expansion during the current fiscal year, particularly if domestic investment and consumer demand remain strong. Continued improvement in infrastructure activity and electricity generation is also expected to reinforce industrial momentum in the coming months.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com