The manufacturing momentum displayed is not just real, but sustainable | Photo Credit: AMIT DAVE

Since the Iran conflict broke out in February, the market narrative has turned quite gloomy about the prospects for the economy — the energy shock adding to the prevailing pessimism over AI disruption and tariffs. However, macro indicators are telling a very different story about India’s resilience.

A key indicator which suggests that the animal spirits are very much alive, in some sectors, is the Index of Industrial Production (IIP). After dipping to 3.2 per cent in March 2026, year-on-year growth in the IIP improved to 4.9 per cent in April and 5 per cent in May. The latest June reading of 7.3 per cent is at a 23-month high. A deeper dive into the data suggests that the manufacturing momentum displayed by the index is not just real, but sustainable. The use-based classification shows five of the six sub-segments of the IIP performing better in April-June 2026 compared to the same quarter last year. Capital goods expanded at an impressive 14 per cent (8.8 per cent last year), while intermediate goods (8.5 versus 5 per cent) and infrastructure/construction (6.8 versus 6.1 per cent) also put up a strong show. In fact, consumer non-durables was the only segment which didn’t improve upon last year’s growth. High growth rates were achieved by segments such as electrical equipment (25.8 per cent growth), motor vehicles and transport equipment (15 per cent growth each), computers and electronic products (12.5 per cent) and consumer durables (7.2 per cent versus 2.8 per cent).

There are other notable features. Results from listed firms seem to suggest that India has been making substantial strides in energy transition. This shows up in overflowing orders for power and electrical equipment makers. Vehicle sales have grown strongly in double digits even after the upward revision in fuel prices consequent to the Iran war. Costlier fuels have accelerated the pace of EV (electric vehicle) adoption, triggering a 15 per cent growth in motor vehicles and related industries in Q1. Electronics manufacturing has continued to benefit from the indigenisation push and production-linked incentives. At the same time, the late start to the monsoon and prolonged heat wave have sharply propped up demand for air conditioners and cooling systems this year.

The IIP revamp in June underscores these trends. The revised IIP, for instance, captures gas and water supply and waste management which were earlier not covered under ‘Utilities’. The head ‘Electricity’ now granularly measures power generated from both renewable and non-renewable sources. Weights for electrical equipment, motor vehicles and electronic products — fast-growing segments — are higher in the new IIP. The base year revision and the expansion in the item basket (from 407 to 463) are likely to have brought more contemporary products into the ambit of the index. This is a story of resilience and structural transformation in the face of external shock. Policy initiatives should keep this manufacturing momentum going.

Published on August 3, 2026