India’s June IIP growth hits 23-month high of 7.3%, beats estimates: Ind-Ra
Manufacturing and electricity drive broad-based industrial expansion, while capital goods and infrastructure segments signal continued investment momentum despite global uncertainties.
Ind-Ra expects IIP growth to moderate to around 5.4% in July 2026. (AI Image)
India Ratings and Research (Ind-Ra) believes that the key takeaways from the 23-month high Index of Industrial Production (IIP) data for June 2026 are: First, the high growth of 7.3% yoy exceeded expectations (Ind-Ra forecast: 5.7%; May 2026: 5.0%). Second, this performance benefitted from a favourable base effect – manufacturing and overall IIP grew 2.4% and 2.2%, respectively, in June 2025. Third, though IIP growth was broad-based, electricity generation and manufacturing pushed it.
“We expect IIP growth to moderate to around 5.4% in July 2026 due to an adverse base effect. Crude price remains volatile around USD85-90/bbl, and any upward movement would pose downside risk to IIP growth. The capital goods sector continued to grow and maintained its lead. The segment’s performance, along with growth in infrastructure/construction goods and intermediate goods, indicates investment activities have not lost steam. The government’s continued capex is likely to sustain the growth momentum of capital goods and infrastructure/construction goods through FY27,” said Megha Arora, Economist and Director, Ind-Ra.
IIP growth was broad-based with electricity growing 11.4% yoy in June 2026 (May 2026: 11.1% yoy; June 2025: -1.2%), followed by manufacturing at 7.8% yoy (5.2% yoy; 2.4% yoy). The two sectors together account for over 86% of the IIP index. Water supply, sewerage, and waste management grew 6.1% yoy in June 2026 (May 2026: 5.5%; June 2025: 7.9%), while mining & quarrying moved out of contraction at 1.0% growth (negative 1.4%; 4.1%) due to high growth of metallic minerals including rare earth minerals. Gas continued to contract, albeit at a slow pace.
Within the manufacturing sector, 19 out of 23 industry groups grew on yoy basis in the month (May 2026: 16/23; April 2026: 17/23), suggesting the industrial recovery is slowly finding its feet and becoming generalised. However, it will be too early to term this as a broad-based industrial recovery. Like previous months, electrical equipment and motor vehicles, trailers & semi-trailers continued to record strong growth of 34% yoy in June 2026 (May 2026: 20.8%; April 2026: 19.2%) and 17.5% (14.5%; 12.7%), respectively. The four sectors that contracted included petroleum products, chemical products, wearing apparel, and wood products.
All the six use-based segments grew in June 2026, with capital goods maintaining lead at 14.2% yoy (May 2026: 15.5% yoy; June 2025: 3.4% yoy), followed by intermediate goods. In fact, these sectors grew faster than the composite index. Consumer durables marginally decelerated, while consumer non-durables recorded strong growth in June 2026 compared to contraction in May 2026 and June 2025.
Strong growth of capital goods (14.0% yoy) and infrastructure/construction goods (6.8% yoy) in 1QFY27 suggest low/minimal impact of West Asia crisis on investment activities. This is corroborated by the output growth of steel and cement sector at 4.8% and 8.8%, respectively, in 1QFY27.
Core Sector Performance: The performance of nine core sectors improved to 5.0% yoy in June 2026 (May 2026: 3.2%; June 2025: 1.1%) due to the base effect and strong growth recorded by iron ore, followed by electricity and cement. These sectors account for over 40% of the core sector index. Coal moved out of the contractionary phase after three months, while steel growth slowed down.
