Industrial Production and Output Performance
India’s factory output, as measured by the Index of Industrial Production (IIP), showed significant declines at the start of fiscal 2026. The IIP growth slowed to 2.7% in April, marking an eight-month low, and nearly halved from the previous year's growth of 5.2% in April.
Core Sectors and Industrial Output
- The eight core sectors recorded a 0.5% growth in April, reflecting an eight-month low and a steep decline from the previous year's 6.9% growth.
- These sectors contribute about 40% of the IIP's weight.
- The overall industrial output growth for the last fiscal year was 4%, marking the lowest in four years.
Sector-specific Performance
- Mining: Experienced a contraction of 0.2% for the first time since August 2024. Despite a rise in absolute export values from $25 billion in FY15 to $42 billion in FY25, its share in exports declined from 8.1% to 5.1%, affecting overall goods exports.
- Manufacturing and Power: Growth slowed to 3.4% and 1.1% respectively, compared to 4.2% and 10.2% previously.
Rural Consumption and Inflation
The continued contraction in consumer non-durables' output indicates low rural consumption despite retail inflation hitting a six-year low at 3.16% in April. Food prices contracted for the sixth month to 2.14%, leading to below MSP rates for most staples.
Policy Recommendations
- The government should systematically implement Minimum Support Prices (MSPs) for farm produce to enhance rural incomes and consumption.
- Private sector capital expenditure should be encouraged to boost domestic incomes and consumption demand.
- Export-oriented sectors should diversify to mitigate tariff and supply chain shocks while expanding beyond traditional markets like the U.S. and EU.
Positive Indicators
- Capital goods output surged to 20.3% in April, indicating investor confidence and diversification of exports.
