India’s industrial production hit a 26-month high of 7.8% in Dec-25 from 7.2% YoY (revised up from 6.7% earlier) in Nov-25. The headline print significantly exceeded market expectations, which had broadly anticipated growth at ~6%. On a FYTD basis i.e., Apr-Dec, IIP has clocked a growth of 3.8% vs. 4.1% in the corresponding period in FY25. 

Key highlights of Dec-25 data

• On a sequential basis, the IIP index expanded by 7.3% MoM, well above the median expansion of 6.7% typically associated with the month of Dec. 
• Among the 25 sub-sectors of IIP, 23 registered a sequential expansion while only 2 saw a sequential contraction.
• Sectoral classification (annualized comparison): 
  1. The growth upside was broad-based, across all sub-sectors. 
  2. After contracting in 6 out of the previous 8 months, the mining sector extended its recovery, expanding by 6.8% YoY in Dec-25 (an 18-month high). 
  3. Manufacturing sector continued to exhibit sustained momentum at 8.1% YoY, only a tad lower than the 25-month peak of Nov-25.
     • Within manufacturing, 16 out of 23 sub-sectors posted positive annualized growth, with 7 of them recording double-digit expansion, led by Computer, electronic and optical products (34.9%), Motor vehicles, trailers & semi-trailers (33.5%), Other transport equipment (25.1%), Tobacco products (18.4%), Base metals (12.7%) and Non-metallic mineral products (11.9%).
     • On the other hand, the annualized drag was on account of: Other manufacturing goods (-14.8%), Electrical equipment (-11.6%), Wearing apparel (-8.0%), Textiles (-2.4%), Leather (-1.6%) and Beverages (-1.2%). 
  4. Growth in Utilities rebounded firmly after two consecutive months of contraction, at 6.3% YoY, touching a 9-month high in Dec-25. 
• Sectoral classification (use-based comparison): 
  1. The expansion was largely broad-based, supported by sustained investment activity and rebound across consumer segments. Consumer durables emerged as the fastest-growing segment, expanding by 12.3% YoY, (a 13-month high) while consumer non-durables continued to expand for the second consecutive month, rising by 8.3% YoY. 
  2. Within investment-oriented categories, infrastructure and construction goods recorded a double-digit expansion at 12.1% YoY, followed by capital goods, which grew at 8.1% YoY. 
  3. In contrast, primary goods output expanded at a relatively subdued pace of 4.4% YoY in Dec-25.

Inferences and outlook

The sharp pickup in IIP growth in Dec-25 was in line with trends observed across several high-frequency indicators during the month:

• Core Industries output reached the highest level of FY26, translating into a 4-month high growth at 3.7% YoY in Dec-25 with 5 out of 8 sectors noting an annualised expansion, led by cement (+13.5%) and steel (+6.9%).  
• Strong urban demand continued to underpin manufacturing activity during Dec-25 as evident from passenger vehicles recording a 14-month high growth of 26.6% YoY, aided by year-end promotions and pre-emptive buying ahead of anticipated price revisions with GST rate cuts providing incremental support.
• GST E-way bill generation edged up further to 138.3 mn in Dec-25 (highest on record) indicating robust movement of goods and a pickup in underlying trade activity. Alongside an uptick in GST revenue collections by 6.1%YoY, reversing the sequential slowdown following the rate cuts implemented in Sept-25.
• Infrastructure-linked industrial activity continued to find support from elevated public capital expenditure, with central government capex rising 28.2% YoY during Apr–Nov FY26 (vs -12.3% in FYTD25). 

Going forward, industrial activity would be influenced by the following: 

• India’s exports to the US continue to face the brunt of 50% tariffs for the 4th-consecutive month. However, recent diplomatic signals from the US administration suggesting a potential roll-back of these tariffs provide some optimism, particularly in context of India’s narrowing trade surplus with the US along-with a strategic reduction in Russian oil purchases (-29% MoM in Nov-25).  
• Building on an expanding FTA footprint- following quick on the heels of deals signed with EFTA, the UK, Oman, and New Zealand, the latest India–EU accord marks another milestone in India’s export diversification strategy. With an aim to deliver upfront duty elimination on 90.7% of India’s export lines (~USD 33 bn), covering key labour-intensive sectors such as textiles, leather, footwear, toys, gems and jewellery etc., the deal is expected to provide an essential level playing field vis-à-vis major Asian peers and possibly provide an impetus to manufacturing output over the medium-term. 
• On the domestic front, while the consumption outlook has improved on the back of easing food inflation, GST-led price corrections, supportive monetary policy and budgeted income-tax relief, manufacturing activity is yet to exhibit a commensurate pickup. 
  1. At a more granular level, manufacturing PMI has softened over the past two months, easing to a two-year low of 55.0 in Dec-25, while IIP growth during the FY26 festive window (Aug–Oct) undershot last year’s festive performance (Sep-Nov). 
  2. Within consumer goods, festive-period IIP growth across both durables (4.0%) and non-durables (-4.0 %) was materially weaker than a year ago, suggesting that incremental consumption demand was increasingly met via imports, as reflected in non-gold consumer goods imports rising over 10% YoY on an FYTD (Apr–Nov) basis.
  3. The pick-up in consumer goods production in Dec-25 though is encouraging, further build-up in its strength will be on watch. 

From the perspective of manufacturing sector, the upcoming Budget could offer critical policy insights and lay down a road map for catapulting the sector. Extension of PLI scheme to underleveraged sectors, withdrawal of QCO in key sectors, new labour codes on the anvil, coupled with faster proliferation of new tech such as AI and industrialization 4.0, could change the shape of India’s manufacturing in the coming years. 

Table 1: Annualized growth in IIP and its key components

Chart 1: IIP and core industry growth in Nov-25