India’s industrial production growth stood at 5.2% in Feb-26, marginally above 5.1% recorded in Jan-26 (revised up from 4.8% earlier). The headline print also exceeded market expectations, which had broadly anticipated an expansion of 4.2%.

On a FYTD26 basis i.e., Apr-Feb, IIP clocked a growth of 4.1%, unchanged from the corresponding period in FY25. 

Key highlights of Feb-26 data 

• On a sequential basis, the IIP index contracted by 6.4% MoM, sharply higher than the median contraction of 4.9% typically associated with Feb. 
• Among the 25 IIP sub-sectors, only 4 registered a sequential expansion, while the remaining 21 recorded a sequential contraction.
• Sectoral classification (annualized comparison – YoY): 
  1. The growth upside was primarily driven by the manufacturing sector, even as growth in mining and utilities moderated to 3.1% and 2.3%, respectively, lower vis-à-vis Jan-26 growth. 
  2. Manufacturing sector growth improved to 6.0% and came in above the FYTD average, vis-à-vis the 3-month low of 5.3% in Jan-26. 
     • Within manufacturing, 14 out of 23 sub-sectors posted positive annualized growth, with double-digit expansions led by: Other transport equipment (20.7%), Motor vehicles, trailers & semi-trailers (14.9%), Base Metals (13.2%), Machinery & equipment (10.2%), alongside an uptick in Electrical equipment (9.1%) and Paper & paper products (8.6%) among others. 
     • The gains were partly tempered due to the annualized drag in: Tobacco products (-17.0%), Wearing apparel (-16.6%), Other manufacturing goods (-12.4%), Pharma products (-2.3%), Beverages (-1.6%) and Rubber (-1.4%) among others. 
• Sectoral classification (use-based comparison): 
  1. Growth was primarily on account of capital-intensive sub-sectors:
     • Capital goods growth accelerated to a 9-month high of 12.5% (vs 4.1% in Jan-26). 
     • Meanwhile, infrastructure & construction goods grew by 11.2%, extending their 4-month streak of double-digit growth, albeit easing from the 29-month high of 14.6% recorded in Jan-26. 
  2. While growth in Consumer durables rose a tad to 7.3%, consumer non-durables remained in contraction for the second consecutive month at 0.6%. 

Inferences and outlook

IIP growth in Feb-26 is broadly in tandem with trends seen across several high-frequency indicators during the month:

• Core industries output growth eased to a 3-month low of 2.3% in Feb-26, after holding at 4.7% in the preceding two months, with sequential momentum turning negative for the first time in five months. 
• Construction sector output, led by cement and steel, was buoyed by a sustained pace of public capex spend (up 11.5% FYTD till Jan-26), albeit having given up earlier double-digit gains. 
• In contrast, energy sector output growth remained underwhelming, with natural gas (-3.5% FYTD) and crude oil (-2.5% FYTD) continuing their multi-month declines even as refinery products remained flat on an FYTD basis. 
• Externally, India’s exports remained broadly steady in Feb-26. However, from a geographical perspective, exports to the US have cumulatively contracted by 7.5% YoY in past six months beginning Sept-25, largely reflecting the elevated tariff level of 50% that persisted through the 3^rd week of Feb-26.  
• On the other hand, indicators of domestic demand reflected broad-based strength, aided by the lingering fiscal impulse from income tax reductions and GST rate cuts, alongside healthy cash inflows following a strong kharif harvest. 
• Growth in passenger vehicles, two-wheelers, and tractor sales remained at over 25% YoY, well-above the average observed over the past three months. 
• GST e-way bills continued double-digit expansion while growth in GST revenue collections touched a 5-month high. 

Going forward, heightened geopolitical uncertainty, supply-chain disruptions and elevated input costs stemming from the ongoing month-long West-Asian war have clouded the near-term industrial outlook.

• Incipient signs of softening in industrial sentiment are becoming visible, as reflected in India’s manufacturing PMI for Mar-26 which fell sharply to a 4½ year low of 53.8, from a 4-month high of 56.9 in Feb-26.
• Risks of input cost pressures are emerging through multiple channels:
  1. Brent crude prices have shot up by 70.3% since the war’s onset (above USD 100 pb for two weeks as of 27^th Mar-26). 
  2. In parallel, industrial metals prices have continued to firm (IMF industrial and energy metals indices up by 4.7% and 15.2% respectively, FYTD till Feb-26). 
  3. Additionally, a 4.1% INR depreciation over Feb-26 could further exacerbate the impact, potentially weighing on industrial margins. 
• Given the 20-month streak of negative domestic output growth, risks to India’s natural gas segment appear more formidable. To give some context:
  1. Notwithstanding the decline in import volumes (-4.7% FYTD till Jan-26 vs +18.3% in the corresponding period of FY25), India still meets half of its LNG consumption through imports. With ~70% of this volume transiting via the now-blockaded Strait of Hormuz, alongside prices at a 3-year high, production in sectors such as chemicals, base metals and minerals could come under significant pressure. 
  2. Additionally, owing to the heavy reliance on LNG as a key feedstock, fertilizer production may face heightened downside risks. 
• In a similar vein, supply disruptions affecting ~60% of India’s LPG imports routed via the Hormuz chokepoint have led to a 7.9% and 6.9% increase in commercial and household LPG cylinder prices, respectively. This could act as an incremental drag on discretionary private consumption, thereby weighing on consumer non-durables output. 
• Revenue loss from recent excise duty cuts on petrol and diesel (if sustained), together with the likelihood of a higher fertilizer subsidy outgo, could further tighten the fiscal space for capex-led infrastructure activity in FY27.

The economic fallout from the ongoing West Asian conflict will largely depend on its duration. Should crude oil prices average close to USD 100 pb in FY27, India’s GDP growth could face a downside impact of ~60 bps. A significant portion of the drag is likely to transmit through weaker industrial activity.

Table 1: Annualized growth in IIP and its key components

Chart 1: Core sector slowdown contrasts with stable IIP growth in Feb-26