Industrial output accelerates 8 pc in August on record manufacturing growth

New Delhi, Sep 28 (PTI) India's industrial output grew at its fastest pace in several months in August, expanding 8 per cent year-on-year, government data showed on Monday, driven by a strong performance in manufacturing and electricity generation.

The Index of Industrial Production (IIP) growth accelerated to a revised 7.4 per cent in July, exceeding market expectations and pointing to sustained momentum in factory activity despite a sharp contraction in mining output.

Manufacturing output, which accounts for the bulk of the industrial index, rose 9 per cent in August, following a revised 8.2 per cent increase in July. Electricity generation jumped 12.3 per cent, while mining and quarrying output contracted 5.6 per cent.

"In a record performance, manufacturing sector recorded growth of 8 per cent or more in the last three consecutive months," the Statistics Ministry said.

The August data is the fifth monthly IIP release under India's new series, which uses producer prices to calculate factory output rather than wholesale prices used under the previous methodology.

Within manufacturing, 18 of 23 industry groups recorded year-on-year growth in August. Motor vehicles, electrical equipment and other transport equipment were among the biggest contributors, growing 25.2 per cent, 30.9 per cent and 25.3 per cent, respectively.

The production of consumer durables, including automobiles and mobile phones, rose 11.1 per cent, while consumer non-durables such as food products and toiletries grew 2.1 per cent, reversing a revised 0.8 per cent contraction in July.

Capital goods output rose 16.9 per cent, while intermediate goods increased 13.7 per cent and infrastructure and construction goods grew 6.4 per cent, indicating that the expansion extended beyond consumer-facing sectors.

For the first five months of the financial year, industrial output grew 6.7 per cent, compared with 4.2 per cent in the same period a year earlier.

Economists said the data pointed to a broad-based strengthening in industrial activity during the second quarter, supported by domestic and export demand.

"IIP averaged 7.7 per cent in July and August, up from 6.2 per cent in the first quarter," said Dipti Deshpande, principal economist at Crisil.

She said manufacturing remained the primary driver, followed by electricity, while capital goods, intermediate goods and consumer durables pointed to a broader-based expansion.

However, Deshpande expects industrial growth to moderate in the second half of the financial year as elevated costs, higher interest rates and softer global demand weigh on activity.

A sharp rise in crude oil prices and other industrial input costs following the conflict in West Asia could also put pressure on factory output and corporate profitability, she said.

On the domestic front, risks from the monsoon and potentially weaker agricultural output and rural incomes could weigh on demand. High-frequency indicators already suggest some moderation in rural demand, with two-wheeler sales growth slowing to 10.9 per cent in August from an average of 20.6 per cent in the first quarter, while tractor sales growth eased to 0.8 per cent from 21.7 per cent.

Electricity generation was another significant driver of August's industrial growth..

Crisil said output was supported by unusually warm weather and below-normal rainfall, with August 2026 being the hottest August on record and rainfall 16 per cent below normal.

Deshpande expects India's economic growth to moderate to 7 per cent this fiscal year from 7.8 per cent last year, although government capital spending and state-level cash transfers could continue to support investment and household demand.

The strong industrial data nevertheless suggests the economy entered the second quarter with considerable momentum, even as rising energy costs and weaker global conditions pose risks to growth in the months ahead.