Industrial fundamentals have remained resilient, but are not broad-based

Industrial fundamentals have remained resilient, but are not broad-based

Earlier this week, the Ministry of Statistics and Programme Implementation released the latest Index of Industrial Production (IIP), a key barometer of India’s industrial health. The April 2026 print assumes added significance as it is the first release under the new 2022-23 base series and the second full month following the U.S.-Israeli war on Iran. Industrial output grew 4.9% year-on-year in April. While direct comparisons with earlier data should be treated with caution given the extensive revisions to the index’s basket, weights and methodology, the numbers suggest that India’s industrial fundamentals have remained relatively resilient despite disruptions to global oil and gas supply chains. A granular reading, however, reveals that this resilience is far from broad-based. Capital goods output expanded by a robust 16% year-on-year, reflecting the continuing effects of elevated public capital expenditure and infrastructure spending. By contrast, consumer durables output grew only 4.3%, while consumer non-durables expanded by a modest 2.8%, suggesting that rising fuel and energy costs may be exerting pressure on household consumption.

More significant than the headline growth number, however, is the extensive overhaul of the IIP itself. The revised series seeks to better reflect the structure of a rapidly changing economy. New products and sectors have been incorporated and several obsolete items dropped. A fourth major sector — water supply, sewerage and waste management — has been introduced with a weight of 2.02%. The electricity category has been expanded into Electricity and Gas Supply, with its weight rising to 10.87% from 7.99% earlier. Manufacturing remains the dominant component of the index, though its weight has declined marginally to 76.06% from 77.63%. More notable is the reduction in the weight of mining and quarrying to 11.05% from 14.37%. These shifts suggest that the importance of value-added infrastructure and utility services in gauging industrial activity has expanded, while the relative significance of primary resource extraction has diminished. Together, these changes better capture India’s emergence as a components and value-added manufacturing hub integrated into global supply chains. Most importantly, the government has indicated its intention to move towards a chain-linked framework with more frequent updates to sectoral weights. Such a system would allow official statistics to better keep pace with structural changes in the economy, making the IIP a more accurate and timely gauge of industrial health.