India’s industrial production growth eased to 6.7%YoY in Jul-26, from an upwardly revised and series high of 8.8% in Jun-26. The outcome was nevertheless better than market expectations that were pegged at close to 6.0%. The IIP print adds to the spate of high-frequency indicators pointing to improved economic activity in the month, compared to Q1 FY27. 

Encouragingly, the Jun-26 print underwent a sizeable upward revision, from 7.3% earlier to 8.8%.

• The upward revision was led by higher growth under the index heavy-weight manufacturing sub-sector - now at 9.5% vs. 7.8% as per preliminary reading.
• Growth in Electricity & gas was revised upwards - now at 11.3% vs. 10.6% earlier.  

Key highlights of Jul-26 data 

• On a sequential basis, the IIP remained unchanged (at 0.0%MoM), marginally better than the average ~0.2% contraction seen over the past three years in July. 
• Sectoral classification (annualized comparison): 

• Notwithstanding the moderation vis-à-vis Jun-26, headline IIP growth remained resilient in Jul-26. 
• Sectoral growth was broad-based, except for the mining sector. 
• Growth in Water Supply, Sewerage, & Waste Management rose to a 12-month high of 7.4% in Jul-26 from 6.1% in Jun-26. In comparison, growth in sub-sectors of the Manufacturing sector and Electricity & Gas remained robust, albeit weaker than the previous month, at 7.3% and 8.7% respectively. 
• Within Manufacturing, 19 out of 23 sub-sectors recorded positive growth. The top 3 performing sub-sectors were Electrical equipment (28.3%), Motor vehicles, trailers and semi-trailers (22.2%) and Other transport manufacturing (22.0%). 
• Within electrical equipment, item groups that drove growth included: Electrical apparatus for switching/protecting electrical circuits, UPS and Solid-state drives, and End-face connectors for optical fibres and cables.
• The 4 sub-sectors which recorded negative growth were Tobacco (-12.2%), Wearing Apparels (-0.6%), Chemicals (-2.7%) and Pharmaceuticals (-5.6%). 
• Growth in Mining & Quarrying slipped into negative territory once again, to -0.9% in Jul-26. The pick-up in rainfall activity in Jul-26 is likely to have weighed on mining activity.

• Growth remained largely robust across all sub-categories in Jul-26, barring Consumer non-durables.
• Three sub-sectors, namely – Capital goods, Intermediate and Consumer durables, clocked double-digit expansion in Jul-26, at 16.1%, 10.0% and 10.5% respectively.
• Consumer non-durable was the only weakling, as growth slipped into a contraction of 1.0% from a short-lived spurt of 5.6% in Jun-26. FYTD27 growth for the category remains subdued at 1.1%. 
• The use-based classification of IIP underscores the strength in investment-oriented sectors, possibly led by the government’s supportive capex cycle, alongside a performance gap between Consumer durables and Non-durables. The latter is perhaps a reflection of uneven household demand.

Inference and outlook

The resilience in IIP growth in Jul-26 is broadly in sync with a host of other high-frequency indicators, such as e-way bill generation, fuel consumption, two-wheeler and tractor sales, credit growth – all of which point to a broad-based improvement in economic activity in Jul-26.

The month of Jul-26 helped improve the sentiment on two counts –

• One, it saw the dissipation of the peak impact of the Middle East crisis. While crude oil prices have been volatile since late Jul-26, the average price at USD 85.4 pb in Jun-26 and USD 83.8 pb in Jul-26 indicates a meaningful reprieve vis-à-vis previous three months, when crude had averaged at over USD 100 pb.
• In addition, Southwest monsoon rainfall, after a dismal start in Jun-26 (40% below LPA), recouped momentum in Jul-26 – with near-normal rainfall. The actual rainfall outcome was better than even IMD’s forecast of a 6% deficit. 

On a FYTD basis, IIP growth has averaged a robust 6.3% compared to 4.0% over the same period in FY26, despite the global headwinds. The sub-sectors of manufacturing and electricity have both added meaningfully to growth on the sectoral side, reflected in strength in capital and intermediate goods on the use -side. 

Having said, the encouraging performance of IIP so far in the fiscal year masks emerging concerns.

• Monsoon: The southwest monsoon is running a cumulative deficit of 13% so far (as of Aug 28^th). Kharif sowing has caught up after a dismal start to the season, which saw an annualized contraction of 22.7% as of Jun 26^th. Nevertheless, the current status shows an annualized contraction of 1.7% as of Aug 28^th. While sowing activity is expected to conclude in the coming weeks, forecasts of strong El Nino conditions could potentially create some disruption. The likelihood of strengthening El Nino conditions in the coming months could see spillover effects on the north-east monsoon season. Cumulatively, this could impinge upon agricultural production and rural consumption expenditures. 
• Geopolitics: While the Middle East conflict has eased compared to Mar-May 2026 levels, shipping through the Strait of Hormuz remains below pre-conflict levels, keeping freight costs and supply disruptions elevated. We maintain our assumption of Brent crude averaging in the USD 80–85 bl range in FY27.
• Second-order demand shock: Cost-push pressure on goods prices could erode purchasing power, hitting price-sensitive sectors such as FMCG, consumer durables and textiles with a lag.
• Fading tailwinds: Urban consumption is absorbing higher fuel and input costs, with a backloaded 25–50 bps rate hike penciled in for H2 FY27, while the boost from GST rationalization is tapering.

• Overall, we expect industrial production growth to remain investment-led, although growth is likely to moderate through H2 FY27 as: (i) favourable base effects from GST rationalization fade, (ii) the anticipated consumption drag from a weak monsoon becomes more visible, and (iii) higher inflation and the likely monetary policy tightening impinge upon production momentum. Meanwhile, sustained public capex, new-age FTAs and targeted MSME support should cushion the slowdown while elevated input costs and geopolitical disruptions remain key headwinds. We retain our FY27 GDP growth forecast of 6.4% (down from 7.7% in FY26) for now – this will be reassessed following the Q1 GDP release next week.

Table 1: Annualized growth in IIP and its key components