Industrial output growth hits 5-month low of 4.1%

Industrial output growth hits 5-month low of 4.1%

Growth in the Index of Industrial Production (IIP) slowed to a five-month low of 4.1% in March 2026, the first month of data after the West Asia crisis began, pulled down by a near-halving in construction sector growth rates and low growth in consumer-centric sectors.

Data released by the Ministry of Statistics and Programme Implementation on Tuesday showed that growth in the IIP has been slowing since January, even before the West Asia crisis broke out on February 28.

Economists point out that the full economic impact of the crisis will play out over the next few months.

For the full financial year 2025-26, growth in the IIP stood at 4.1%, marginally faster than the 4.07% recorded in 2024-25.

According to Madan Sabnavis, chief economist at the Bank of Baroda, the growth of 4.1% in March is “impressive given that the core sector growth was negative for the month”.

Data released earlier this month had shown the eight core sectors, which make up about 40% of the IIP, had contracted 0.4% in March.

Manufacturing hit

Within the IIP, the manufacturing sector slowed to a five-month low of 4.3% in March, although this was faster than the 4% recorded last March.

“Domestic manufacturing has begun to bear the brunt of costlier and tighter supplies of petroleum products and natural gas,” Dipti Deshpande, principal economist at Crisil, said.

Growth in the capital goods sector, notably, accelerated to a 29-month high 14.6% in March from an already-robust 12.4% in February. While growth in the infrastructure and construction sector slowed to a nine-month low of 6.7%, economists still felt it highlighted strength in the economy. “Importantly, the strength in capital goods and infrastructure goods [6.7%] underscores that investment-led demand remains intact, even as consumer non-durables posted a muted 1.1% rise,” Vikrant Chaturvedi, associate director of research at Brickwork Ratings said. The 1.1% rise in consumer non-durables came on a low base as the sector had contracted 4% in March last year.

According to Ms. Deshpande, this is not the first data point showing the stress in the manufacturing sector.

“The Purchasing Managers’ Index also slipped in March from February but remained in the expansion zone, indicating the likely uneven impact of the conflict across sectors and time based on their ability to absorb the shock.”

“The March data captures only a part of the shock as uncertainty and weak producer sentiment have yet to fully manifest in production data,” she added.

“The deeper impact is expected to show up down the road, particularly in the first quarter of this fiscal.”