Losing momentum: Industrial growth fell to 9-month low of 1.2% in May

India’s industrial output grew just 1.2 per cent in May, the slowest pace in nine months, retreating further from a downward revised figure of 2.6 per cent in April which was also the weakest uptick since August 2024.  

 

An early monsoon pulled electricity generation down by a sharp 5.8 per cent, the first contraction in nine months and the sharpest since June 2020, while mining output also shrank 0.1 per cent, marking the second straight month of decline.

 

Manufacturing output rose 2.6 per cent in May, the slowest since August last year, with 13 of 23 sectors recording positive growth, down from 16 in April. Base effects also weighed on the Index of Industrial Production (IIP) last month as factory output had spiked 6.3 per cent in May last year.

 

Based on end-use, half the segments recorded a contraction. However, investment related segments witnessed a pronounced acceleration. Capital goods output hit a 19-month high growth pace of 14.1 per cent, while infrastructure goods revved up 6.3 per cent after recording the slowest uptick in six months in April at 4.7 per cent.

 

Primary goods shrank 1.9 per cent, the second straight month of shrinkage, while consumer non-durables declined 2.4 per cent, the fourth successive month of contraction. Consumer durables’ production also fell for the first time since November 2023, and was down 0.7 per cent in May. Output growth in intermediate goods decelerated to 3.5 per cent. 

 

“Investment-oriented sectors shone, with capital goods growing in double digits and infrastructure and construction goods improving.  Government also frontloaded capital spending with May capex accounting for 19.7% of the fiscal 2026 budget target,” said Dharmakirti Joshi, chief economist at Crisil Ratings.

 

Aditi Nayar, chief economist, ICRA Ratings, flagged the anemic growth in manufacturing and uneven underlying trends. “The tepid industrial volume growth in the first two months of the quarter doesn’t augur well for industrial GVA (Gross Value Added) growth in Q1 FY2026,” she noted.

 

India Ratings’ associate director Paras Jasrai reckoned industrial output growth in June is likely to be around 1.5 per cent, with power generation contracting again.

 

Output growth in India’s eight core infrastructure industries had also plummeted to a nine-month low of 0.7 per cent in May from an upwardly revised figure of 1 per cent in April. Half of the sectors, including electricity, crude oil, fertilisers and natural gas, clocked sharp contractions.