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India’s Industrial Sector Sees Gentle Start to FY26 as Consumer Demand Eases

Masum Ali Published Jul 01, 2025, 10:22 AM Updated Sep 16, 2026, 05:26 AM

India's industrial economy hit a speed bump in the first half of FY26, with the growth of the Index of Industrial Production (IIP) slowing to a nine-month low of 1.2% in May 2025, far removed from 2.6% in April and a robust 6.3% in the same period a year ago. The slowdown is most pronounced i...

Key Highlights:

Consumer Goods Slump: Consumer durables and non-durables continued to decline lower, an indicator of weak demand and slow rural consumption. Non-durables declined for the third straight month, with weak sales of food and hygiene items reflecting a broader FMCG slowdown.

Manufacturing Slows Down: Manufacturing, which represents more than three-fourths of the IIP, increased only 2.6% in May, barely half from 5.1% in May 2024. Mining production fell into the negative at -0.1%, and electricity generation fell sharply by -5.8%—both reversing high growth a year ago.

Early Monsoon Effect: Early arrival of the monsoon suppressed mining activity and power consumption, which further weighed on industrial production overall.

Quarterly Outlook: April-May FY26 industrial output was at 1.8%, a stark deviation from 5.7% growth in the corresponding quarter last year. Economists warn that this sluggish start will restrain industrial GVA growth in Q1, as three out of six use-based categories contracted.

Expert View: Analysts are blaming the slowdown on a combination of domestic demand weakness, foreign trade woes, and supply chain bottlenecks. The lone silver lining was a 14.1% growth in capital goods on the back of a low base effect. With industrial expansion decelerating and consumer product manufacturing slowing down, policymakers are facing increasing pressure to boost demand and rev up the economy in the coming months.

Sources: Moneycontrol, Financial Express, News18

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