India's IIP growth may remain in single digits despite festive demand as weak monsoon, global risks weigh: Report

New Delhi: India's industrial production growth may remain within single digits in the coming months, despite encouragement from festive demand, according to a Union Bank of India research report. While strengthening festive demand could provide a positive boost to the Index of Industrial Production (IIP), the report highlights downside risks stemming from weak monsoon conditions, the impact of delayed input cost transmission on demand, and potential downward pressure from global supply shocks.

The August 2026 IIP growth was reported at 8%, up from 7.4% in the previous month, though part of this increase was attributed to a favorable base effect. Manufacturing sector growth, which contributed significantly to the IIP figure, turned negative in sequential momentum. Mining sector production, however, contracted by 5.6% in August, marking the steepest decline in the sector in 17 months.

Signs of gradual recovery in demand are emerging, particularly in rural consumption. Consumer non-durables returned to positive growth at 2.1% in August after a decline in the previous month, signaling an uptick in rural demand. Consumer durables demand also turned positive, along with capital goods production, indicating sustained strength in investment-related and discretionary demand.

High-frequency indicators further suggest that overall economic activity remained resilient in August, bolstered by GST collections, e-way bills, electricity demand, digital payments, and stronger retail two-wheeler sales. The balance between festive demand support and risks arising from monsoon conditions, input costs, and global supply disruptions will determine the pace of industrial growth in the coming months.