The Index of Industrial Production (IIP) grew by 5.2 percent in February 2026, quickening from the 5.1 percent (upwardly revised) recorded in January 2026, according to thelatest Government data. While the growth indicates widening industrial momentum, consumer non-durables and specific manufacturing items continue to show signs of strain.
Manufacturing carries the load
The manufacturing sector led growth with a 6 percent increase, while mining grew at a modest 3.1 percent and electricity at 2.3 percent. Within manufacturing, 8 of 23 industry groups posted higher growth.
Aditi Nayar, Chief Economist at ICRA, noted that the February reading exceeded ICRA’s forecast of 4 percent, aided in part by a favourable base. “The slight sequential uptick in IIP growth in February 2026 belied the halving seen in core sector expansion,” she says.
For instance, the main contributors were other transport equipment (growing at 20.7 percent), motor vehicles, trailers, and semi-trailers (14.9 percent), basic metals (13.2 percent), and machinery and equipment (10.2 percent). In basic metals, steel intermediates—MS slabs, flat products of alloy steel, and pipes and tubes—drove the numbers, pointing to sustained construction and infrastructure activity. In motor vehicles, the growth was powered by auto components, commercial vehicles, and wheel rims, suggesting freight activity remains healthy.
Nayar highlighted that four of the six use-based segments saw an improvement in their year-on-year performance in February compared to January. Infrastructure and construction goods, she notes, recorded double-digit growth for the fourth consecutive month, “suggesting that construction activity has remained quite robust.”
Investment demand stays firm
Capital goods grew 12.5 percent, infrastructure and construction goods surged 11.2 percent, and intermediate goods rose 7.7 percent. Consumer durables also held up at 7.3 percent growth.
The concern lies with consumer non-durables, which contracted 0.6 percent—a sign that rural and mass-market consumption may still be finding its footing. Pharmaceuticals (-2.3 percent), rubber and plastics (-1.4 percent), beverages (-1.6 percent), and wearing apparel (-16.6 percent) also dragged on overall manufacturing performance.
However, the near-term outlook carries fresh risks. Dr Devendra Pant, Chief Economist, India Ratings and Research says that while domestic demand is currently firm, the geopolitical situation in the Middle East remains a significant headwind that could alter this trajectory.
ICRA expects IIP growth to decelerate to around 3-4 percent in March 2026, with Nayar flagging the West Asia crisis as an emerging headwind for some manufacturing segments, affecting both the price and availability of inputs, alongside an anticipated weakening in the electricity sector performance.
First Published: Mar 30, 2026, 18:17
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