Under the revised series (base: 2022-23), India’s industrial production growth expanded by 4.9% in Apr-26 from 3.2% in Mar-26. The headline print surprised significantly on the upside, exceeding market expectations of ~3.7%.

Basis the new series, cumulative IIP growth stood for FY26 stood at 4.3%, lower than the 6.4% growth recorded in FY25 (revised up from 4.0% under the new series). The transition from 2011-12 base to 2022-23 appears broadly congruous, likely to represent the contemporary structure of India’s industrial structure better (for a detailed description of new IIP series, please see Appendix section).

Key highlights of Apr-26 data 

• On a sequential basis, the IIP index contracted by 9.1% MoM, slightly lower than the median contraction of 9.7 % typically associated with April. 
• Under the revised classification, 24 out of the 32 IIP sub-sectors recorded a sequential contraction, while only 8 sub-sectors saw a sequential expansion.
• Sectoral classification (annualized comparison): 
  1. The expansion was broad-based, with Mining being the sole laggard, contracting for the fourth consecutive month by 5.1%.
     • At a more granular level, the weakness stemmed from contractions in Non-Metallic Minerals (-14.1%) and Fuel minerals (-5.6%) even as Metallic minerals offered support (12.3%).
  2. Output for the newly added sector of Water Supply, Sewerage & Waste Management expanded by 6.6%, marking an 8-month high.
  3. Pick-up in utilities (4.9%) was underpinned by growth in renewable electricity sources at 16.8% – marking a record high under the new series.
  4. Encouragingly, growth in the heavy-weight manufacturing sector clocked at a 4-month high of 6.2% in Apr-26, vis-à-vis 3.9% in Mar-26.
     • Within manufacturing, 17 out of 23 sub-sectors posted positive annualized growth, with double-digit expansions led by: Electrical equipment (19.2%), Other transport equipment (18.8%), Textiles (15.6%), Paper & paper products (13.7%), Machinery & equipment (12.9%), Motor Vehicles, Trailers & Semi-Trailers (12.8%) and Fabricated metal products (11.6%). 
     • Gains were tempered by Wood & wood products (-12.5%), Beverages (-7.1%), Wearing apparel (-7.0%) and Printing & reproduction of recorded Media (-3.4%) among others. 
• Sectoral classification (use-based comparison): 
• Capital Goods sector remained the key growth driver, sustaining double-digit expansion for a sixth consecutive month at 16.0%
• Consumer oriented output showed signs of improvement, with Durables growth accelerating to 4.3% (vs. 2.4% in Mar-26) and Non-Durables rebounding into positive territory at 2.8% (vs. -0.9% in Mar-26).

Inferences

IIP growth in Apr-26 stood broadly in line core sector output, as also other high-frequency indicators pointing to underlying economic resilience, despite continuing of the Middle East crisis. 

• Core sectors output remained firm at 1.7% YoY, up slightly from the 5-month low of 1.2% in Mar-26 (a sharp upward revision from the earlier estimated contraction of -0.4%). 
  1. Construction sector output led by cement and steel offered support, as also electricity production growth accelerating to a 3-month high amid a heatwave-driven surge in demand.
  2. In contrast, the other five subsectors, including energy and refinery products, emerged as growth laggards. While Fertilizer output sequentially recovered from its series low in Mar-26, the one-off uptick in natural gas production slipped back into contraction.
• Notwithstanding elevated global supply chain pressures, external demand remained supportive, as India’s merchandise exports (+13.8% YoY) clocked their 2nd highest level on record in Apr-26, since the peak observed in Mar-22. In line, India’s exports to the US, for the first time in five months, returned to positive growth territory (+1.1% YoY). 
• However, domestic economic activity indicators remained somewhat mixed:
  1. Annualized sales of retail passenger vehicles and two-wheelers continued to grow in double-digit.
  2. GST e-way bills remained robust, while growth in GST revenue collections remaining above 8% for the third consecutive month
  3. Growth in fuel consumption contracted by 4.6%YoY (from +2.2% in Mar-26), the lowest in 14 months reflecting the sharpest de-growth in LPG consumption on record, alongside strong double-digit drag in diesel oil, other petroleum products, bitumen, and naphtha.

Outlook

While the 6-week armed conflict may have eased under a shaky ceasefire, the broader energy crisis that was triggered continues to linger with the Strait of Hormuz being functionally inoperable. Brent crude price clocked its steepest jump in 4½ years in Apr-26 (+78% YoY) and continued to average above USD 100 pb for the third consecutive month in May-26. 

• Continued disruptions to LPG and LNG flows via the Strait of Hormuz have heightened both price and volume risks, likely to translate into lower output growth across industries with a heavy reliance on gas-based fuels such as metals, non-metallic mineral products, food processing, textiles, fertilizers and chemical products.
• Risks to discretionary consumer demand from the twin shock of war and monsoon could have second-order dampening effects on production.
  1. Retail diesel and petrol prices have been raised by 8.4% and 7.4%, respectively, since 15th May-26, ending a four-year freeze. 
  2. In its updated Southwest monsoon outlook, the IMD has further downgraded its rainfall estimate for 2026 to 90% of LPA (from 92% earlier).
  3. Both these factors could result in a squeeze on household purchasing power, with a lag.
• Sustained input cost pressures stand further exacerbated by the continued depreciation in INR depreciation between Feb-26 and May-26.
  1. Core WPI inflation jumped to a 42-month high of 5.7% YoY in Apr-26.
  2. Manufacturing PMI input prices in May-26 rose at the fastest pace since Jul-22. 
  3. With new export orders already subdued, any pass-through of higher input costs to output prices, could potentially undermine India’s export competitiveness and weigh on export-oriented production. 

Although there could be mitigants to growth downside in the form of continued public capex support, targeted policy interventions to support MSMEs and positive impact from recent FTA’s signed by India with several trade partners kicking-in, the extent and magnitude of both fiscal and monetary policy support may get constrained to maintain broad macroeconomic stability. We now expect GDP growth to moderate to 6.2% in FY27 from an estimated level of 7.6% in FY26.

 Table 1: Annualized growth in IIP and its key components

Chart 1: IIP and Core Sector output moving in tandem

Table 2: Comparison of item-weights: Sectoral Classification

Table 3: Comparison of item-weights: Use-based Classification

APPENDIX