IIP grows 5.1% in May in resilient economy: Manufacturing, consumption and electricity remain key drivers

The May IIP growth was higher than the 2025-26 average of 4.3%.

Manufacturing sector that dominates the index with a 76% weight saw production growth moderate to 5.5% in May, compared to 6.1% in the previous month, reflecting a minor impact from the West Asia crisis.

Electricity and gas output was up 9.9% year-on-year in May, compared to 4.6% in April. Within this group, electricity production was up 11.1% as the summer heat rose.

The IIP was recently revised to reflect industry compositional changes, using 2022-23 as the base year.

Dipti Deshpande, Principal Economist at Crisil said: “Domestic demand remained resilient, with the consumer sectors clocking a cumulative growth of 5.1% (versus 2.5% in April). High-frequency data shows urban demand was the driver of domestic demand.”

According to Megha Arora, director at India Ratings and Research, IIP growth is expected to improve to 5.7% in June 2026 as the base effect will help maintain the growth momentum.

“A decline in crude prices due to the fragile resolution of the West Asia crisis is also likely to support growth. Continued government capex is likely to keep the growth momentum for capital goods and infrastructure/construction goods in FY27 as well,” Arora said.

The month-on-month moderation in manufacturing growth was due to a contraction in coke and petroleum product production which was impacted by the West Asia conflict, Deshpande said.

Water supply, sewerage and waste management – the new entrant in the index with a weight of 2.02 – was up 5.5% in May, compared to 6.6% in April. Mining sector output contracted 1.6%. Within manufacturing, the auto and transport sector, metal products, electrical equipment and computer and electronic products were the main drivers.

Manufacturing of motor vehicles, trailers and semi-trailers was up 14.5% in May. Other transport equipment grew 14.3%, electrical equipment was up 20.8%, and metal products output rose 15.5%. Computer, electronics and optical products grew 11.4%. Basic metals, which have an IIP weight of 9.1 grew 4.6%.

Within motor vehicles, trailers and semi-trailers group passenger cars, auto components, spares and accessories and commercial vehicles” have shown significant contribution in growth, a release by the Ministry of Statistics and Programme Implementation said.

As per the use-based classification capital goods sector was the fastest growing at 12.9% in May as against 12% in April. Growth of intermediate goods contracted sharply to 5.8% from 10.3% in April. Construction goods output was up 5.9 in May.

Primary goods that have a weight in the index of 31.1% were up 2.6% in May, up from 0.8% in April. Consumer durables growth was 7.2% as against 5.6% in April while consumer non-durables expanded 3.6% in May, up from 0.2% in April.

Along with the new data release, the MoSPI has replaced the old WPI-based deflator with the new Output Producer Price Index (Output PPI) deflator with a base year of 2022–23.