Economy maintains strong start to FY27 as industrial production rises 6.7% in July

India's industrial sector demonstrated a strong start to the fiscal year 2026-27, with industrial output increasing 6.7% year-on-year in July. The growth was driven by double-digit production increases in capital goods, signaling strong investments in the private sector. While July's growth rate was lower than the upwardly revised 8.8% in June, Rajani Sinha, Chief Economist at CareEdge Ratings, noted that industrial activity has been resilient despite global uncertainties and high energy prices.

The Index of Industrial Production (IIP) showed industrial growth of 6.3% in the first four months of 2026-27, surpassing the 4% recorded during the same period in 2025-26. The June IIP growth figure was revised upward to 8.8% from the provisional estimate of 7.3%. In July 2025, growth was 5.4%. Rajni Thakur, Chief Economist at L&T Finance, stated that the July IIP data confirms the economy's growth momentum, although the headline number was softer than in June due to weather-related slowdown in the mining sector.

Manufacturing output grew 7.3% in July, down from the 9.5% growth in June but higher than the 5.1% growth in July 2025. Of the 23 industry groups, 19 recorded higher production in July compared to the previous year, except for tobacco products, wearing apparel, chemicals, chemical products, and basic pharmaceutical products and pharmaceutical preparations, which saw lower production due to weak foreign demand.

Mining output decreased by 0.9% compared to last year, while electricity and gas supply, and water supply, sewerage, and waste management sectors experienced growth of 8.7% and 7.4%, respectively.

The IIP data for July precedes the release of GDP figures for April-June, with the Reserve Bank of India forecasting a potential 7% growth for the first quarter of 2026-27, although some economists believe growth may have been as high as 8%. The IIP highlighted double-digit growth in capital goods, intermediate goods, and consumer durables, with capital goods increasing by 16.1% and intermediate and consumer durable goods rising by 10% and 10.5%, respectively. Infrastructure goods output also grew by 6.9%.