Mint Explainer | India’s core sector output and manufacturing boomed in August. Will it sustain?
Manufacturing output surged to a 17-year high in August as core sectors boomed. Mint decodes what fueled India’s industrial growth last month.
New Delhi: India’s economy gathered momentum in August with manufacturing firing on multiple fronts. The eight core infrastructure industries collectively expanded at their fastest pace in over a year, while factory output surged to a 17-year high.
Mint breaks down the drivers behind this steep rise in manufacturing, which is expected to replace services as the economy’s growth engine.
What were the August highlights?
India’s manufacturing activity expanded at its fastest pace in over 17 years in August driven by stronger alignment between supply and demand, according to a private survey.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 59.3 in August from 59.1 in July, 58.4 in June, 57.6 in May, and 58.2 in April.
The last time the index, which is based on monthly surveys of 400 manufacturers, rose above 60 was in 2008. A reading above 50 indicates expansion.
Also in August, India’s core infrastructure industries recorded their sharpest pace in 13 months, with output rising 6.3% annually.
The eight core sectors—coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity—together make up over two-fifths of India’s industrial output.
What led to the manufacturing expansion?
According to the latest manufacturing PMI, the strongest sales and output performances were noted in the intermediate goods category, followed by capital and then consumer goods. August also saw a sharper increase in new orders, driving firms to scale up input purchases.
As for the sharp uptick in the output of core industries, it was buoyed by strong gains in coal, fertilizers, and refinery products. The crude oil and natural gas industries continued to post declines, though the scale of contraction eased compared to July.
Did the US’s tariffs play a role in boosting the August numbers?
Yes. The threat of the US’s reciprocal tariffs prompted Indian exporters to frontload shipments in August to preempt potential duties. This accelerated export orders in sectors such as intermediate and capital goods, adding to the surge in overall factory activity.
To be sure, a 25% reciprocal tariff on many Indian exports to the US took effect on 7 August, followed by an additional 25% duty from 27 August linked to India’s Russian oil purchases, raising the US’s total tariff on several Indian goods to 50%.
What other factors contributed to the record manufacturing output in August?
A favourable base effect (August 2024: -1.5% year-on-year) and robust growth in coal and steel output lifted infrastructure growth to a 13-month high last month, with coal up 11.4% on year (a 14-month high) and steel up 14.2%.
Together, these factors enabled India’s industrial economy to defy headwinds, highlighting the importance of public investment and shifting trade dynamics in shaping near-term growth.
To be sure, public capital expenditure was a key driver, with the government’s ramped-up infrastructure spending boosting demand for steel, coal, cement, electricity, and other core industries. With global trade uncertainties weighing on private investment, the onus of sustaining growth has largely fallen on public capex.
How sustainable is this manufacturing momentum given global uncertainties and private investment trends?
According to Paras Jasrai, associate director, India Ratings and Research, leaving aside coal and steel, “the core sector output growth remained weak at just 2.8% yoy in August 2025, indicating the skewed nature of the growth".
But economists expect construction to pick up from October after the retreat of monsoons, providing support to manufacturing output. “Fertilizer output should also increase as industry stocks up for rabi sowing (planting of winter crops, typically between October and December," said Madan Sabnavis, chief economist at Bank of Baroda.
Overall, amid the ongoing geopolitical challenges, public capex, in the absence of widespread private capex, is expected to drive economic growth this financial year, leading to expectations of high output in construction-related sectors such as steel, cement and coal.
Meanwhile, the US tariffs could weigh on manufacturing, with the outcome of ongoing trade negotiations set to shape future growth prospects.
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