Industrial Output Momentum Weakens as Manufacturing Growth Cools to 4.8%

The manufacturing sector, which accounts for over 77% of the IIP, grew by 4.8% in January, a decline from the 8% plus growth rates seen in the final months of 2025. While 14 out of 23 industry groups managed to stay in positive territory, the growth was largely concentrated in heavy industries. Basic metals led the charge with a 13.2% surge, followed by motor vehicles at 10.9%, showing sustained demand in the automotive and infrastructure sectors.

However, the "use-based" classification revealed a divide in consumer sentiment. While consumer durables, like electronics and appliances, grew by 6.3%, consumer non-durables, that is, daily essentials like soaps and medicines, contracted by 2.7%. This suggests that while urban discretionary spending remains resilient, rural and mass-market demand continue to struggle with uneven recovery.

Capital Goods Performance 

A concerning data point for economists was the performance of the capital goods segment, a key proxy for tracking investment in the economy. Growth in this sector plummeted to 4.3% in January, compared to a robust 10.2% during the same period last year. This shows a potential pause or "wait-and-watch" approach by private players regarding fresh capacity expansion. This is despite the government's continued push for infrastructure through the Union Budget.

Infrastructure and construction goods remained the brightest spot, growing by 13.7%, fueled by high-speed rail projects and highway expansions. For India to hit its full-year growth target of 7.6%, the manufacturing sector will need to regain its 8% growth trajectory in the final quarter of the fiscal year.

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