India’s March industrial production growth slowed to a five-month low. However, it is still stronger than expected in March 2026 amidst supply-side disruptions due to the Iran war weighing on the economy. Experts predict growth trends may continue to remain volatile in the near-term given the global headwinds.
Economists pointed out the steady investment momentum continues to be a silver lining. They are betting on demand pickup potential in the second half of FY27.
Middle East tension, weak demand cloud IIP outlook: Motilal Oswal
Motilal Oswal still believes that geopolitical tensions in the Middle East pose a near-term risk to industrial production, particularly through the impact on global oil prices and trade flows.
“Going ahead, IIP is expected to remain sequential volatile, and a sustainable uptrend will depend on a more durable recovery in mass consumption,” Motilal Oswal said noting that uneven demand weighs on outlook.
“The Mar 2026 IIP print reflects a moderation, owing to weaker electricity output and some cooling in manufacturing and infrastructure growth. However, strong growth in capital goods highlights that investment momentum remains intact. While consumption shows tentative improvement, it is not yet strong enough to drive a broad-based pickup,” Motilal Oswal said.
Resilient consumer goods production shows that Demand-side remain robust
Nomura said the IIP data reflects their broader view on growth — that despite supply-side shocks, because of Iran war is affecting parts of the economy, demand-side indicators remain largely robust, with consumption outperforming industrial and external segments.
Nomura highlighted that the March IIP data indicate an asymmetric reaction of the industrial sector to shocks stemming from the Iran war, with some industries sustaining momentum while navigating fuel supply disruptions, input cost inflation, higher shipping costs, and weaker external demand.
“The resilience of consumer goods production suggests that there has not yet been a material erosion of underlying domestic demand,” Nomura added.
Manufacturing, mining sector surprise analysts
“IIP data printed significantly higher than ICRA’s expectations. The surprise was led by the manufacturing and mining sectors, which grew by a healthy 4.3% and 5.5%, respectively, in the month,” Aditi Nayar, Chief Economist, ICRA noted.
Although growth in both sectors slowed compared to February, they remain the backbone of industrial activity, offering support and helping cushion the overall slowdown.
Conclusion
Most analysts highlighted that even as demand remains resilient so far, supply-side disruptions are “likely to slow near-term GDP growth,” Nomura explained. However, the global brokerage house is pencilling in a faster growth recovery in H2.