India's industrial output growth eases to five-month low of 4.1% in March

New Delhi: India’s index of industrial production (IIP) growth moderated to a five-month low of 4.1% in March, down from 5.1% in February, but higher than 3.9% in March 2025.

Weakness in several manufacturing sectors tracked by IIP weighed on output amid rising input costs and supply disruptions, according to provisional data released by the ministry of statistics and programme implementation (MoSPI) on Tuesday.

This follows the core sector reading, which showed a 0.4% contraction in March, its lowest level in 19 months, compared with a revised 2.8% growth in February and 4.5% expansion in March 2025. The core sector accounts for nearly 40% to the IIP.

“Industrial growth, going by the IIP, was 4.1% for March, which is higher than our expectations of 1-2%. For the year, it was 4.1%. This number is hence impressive given that the core sector growth was negative for the month,” said Madan Sabnavis, chief economist, Bank of Baroda.

"The IIP growth number for March attains significance since this is the first month of the war where the impact would have been felt at the preliminary level. Manufacturing has stood out with 4.3% growth which is comforting. Mining was up by 5.5% and electricity by 0.8%,” Sabnavis added.

Manufacturing, which accounts for the largest share of 77.63% in the IIP, grew at a slower rate of 4.3% in March, compared with 5.9% in February. It was at 4.0% a year ago.

Nine of the 23 industry groups within manufacturing recorded negative growth, while 14 registered positive growth.

Output for manufacturing of wearing apparel fell by 14.6%, computer electronics by 8.2%, leather products by 5.0% and other manufacturing by 29.8% in March.

Mining output registered 5.5% year-on-year growth in March, from a low base of 3.1% in February, but improved from 1.2% a year ago, indicating steady extraction activity.

Electricity generation fell sharply to 0.8% during the month from 2.3% growth in February and below 7.5% in the year-ago period, pointing to moderation in power demand.

The top three positive contributors were manufacturing of basic metals (8.6%); motor vehicles, trailers and semi-trailers (18.1%); and machinery and equipment (11.2%).

Use-based classification data showed a mixed trend, with capital goods output rising by 14.6%, signalling improving investment activity, while infrastructure and construction goods grew 6.7%, intermediate goods expanded 3.3%, and consumer durables increased 5.3%.

Use-based categories refer to the classification of goods by their end use—such as consumer or intermediate goods—offering insights into the economy.

In contrast, primary goods posted 2.2% growth, and consumer non-durables grew a modest 1.1 %, reflecting some weakness in mass consumption demand.

Primary goods are raw materials from natural sources, such as minerals, fuels, and electricity, while intermediate goods are partially processed inputs—such as yarns, chemicals, and semi-finished steel—used in further production.

Overall, infrastructure goods, intermediate goods and capital goods emerged as the key drivers of industrial growth during the month.

The overall index stood at 173.2 in March 2026, compared with 158.8 in February and 166.3 a year ago.

IIP growth was significantly higher than Icra’s expectations of 1.5% for the month. “The surprise was led by the manufacturing and mining sectors, which grew by a healthy 4.3% and 5.5%, respectively, in the month,” said Aditi Nayar, chief economist, Icra Ltd. ”The stronger-than-expected IIP growth performance contrasts with the 0.4% contraction seen in core output, suggesting that the non-core portion of industrial output rose at a robust 7.8% in the month, shrugging off the expected adverse impact of the onset of the West Asia crisis."

India Ratings & Research believes lIP growth in April will improve to around 5.0% as a base effect will help in maintaining the growth momentum. "Government's continued capex is likely to keep capital goods (FY26: 8.2%) and infrastructure/ construction goods (FY26: 9.8%) growth momentum in FY27 as well,” said Megha Arora, director, India Ratings.

India's real gross domestic product (GDP) is estimated to grow by 7.6% (year-on-year) during 2025-26, as per the second advance estimates of the new GDP series (base year 2022-23).