NEW DELHI: In a puzzling development amid concerns about the impact of the war in West Asia, India’s outgoing factory output metric, the Index of Industrial Production (IIP), hit a series high in March, even as year-on-year output growth eased to a five-month low of 4.1 per cent, down from a revised 5.1 per cent uptick in February.
Economists attributed the growth slowdown to subdued performance in the manufacturing and electricity sector, reflecting the early impact of the West Asia conflict. On a full year basis, the IIP growth was marginally higher at 4.1 per cent in 2025-26 (FY26), from 4 per cent recorded in FY25.
The overall IIP reading for March, the last print with 2011-12 as a base year, shot up to 173.2 in March, 9.06 per cent higher than the 158.8 reading in February. The closest the index reading came to this level in recent times was in December 2025, when it stood at 170.7, according to data released by the National Statistics Office (NSO) on Tuesday.
Manufacturing output, which accounts for 78 per cent of the Index of Industrial Production (IIP), grew at a five-month low of 4.3 per cent in March, decreasing from the 5.9 per cent growth recorded in February. However, in absolute terms, the manufacturing output measured by the IIP was 7.8 per cent over February levels and at a three-month high.
Manufacturing output growth through FY26 stood at 5 per cent, compared to 4.1 per cent in FY25. Dipti Deshpande, principal economist at Crisil reckoned that the March data captures only a part of the conflict shock as uncertainty and weak producer sentiment have yet to fully manifest in production data. “The deeper impact is expected to show up down the road, particularly in the first quarter of this fiscal,” she reckoned.
Electricity output hit an eight-month high in March, even as year-on-year growth eased to a four-month low of 0.8 per cent, compared to a 2.3 per cent uptick in February. The overall growth for the sector cooled to 1 per cent in FY 26 during the month, from 5.2 per cent in FY25.
Mining output hit an all-time high under this IIP series, with an index reading of 166.8. This reflected a 5.5 per cent year-on-year (Y-o-Y) growth, up from 3.1 per cent recorded in the previous month. Sequentially, output was up a sharp 14 per cent from February levels. Mining output is up 1.4 per cent in FY26, compared to the 3 per cent growth recorded in FY25.
On the basis of end-use, three of the six IIP segments saw a Y-o-Y decline in their performance in March, compared to the previous month. The sharpest deterioration was recorded for the intermediate goods sector, whose output dropped 54.1 per cent, to 3.3 per cent in March after growing 7.2 per cent in February.
Infrastructure/construction goods output grew 6.7 per cent, down from a double-digit expansion of 11.1 per cent recorded in the previous month. The growth in consumer durables eased to 5.3 per cent, compared to a 7.1 per cent uptick recorded in February.
On the other hand, growth in consumer non-durables exited the contractionary territory, increasing 1.1 per cent in March compared to -0.5 per cent in the previous month.
Primary goods and capital goods registered an improvement in Y-o-Y performance during the month. Four of the six categories registered an increase in their performance in FY26 when compared to the previous financial year.
These include capital goods, intermediate goods, Infrastructure/ construction goods and consumer non-durables. The growth in industrial output stood at 4.1 per cent in 2025-26, marginally up from the 4 per cent recorded in FY25.
Of the 23 major manufacturing segments tracked by the NSO, as many as 14 recorded positive growth in March, including food products, paper and paper products, pharmaceuticals, non-metallic mineral products, and basic metals, among others. Of these, three recorded double-digit growth during the month.
These were machinery and equipment, motor vehicles and other transport equipment.
On the other hand, nine sectors — including chemical and chemical products, beverages, tobacco products— recorded contraction. Wearing apparel saw the sharpest contraction at 14.6 per cent during the month.
“Going forward, urban consumption faces risks from uptick in inflation and subdued IT sector hiring. Furthermore, risks of below normal rainfall amid rising El Nino possibility pose a challenge for the rural demand scenario,” pointed out Rajani Sinha, chief economist at CareEdge Ratings.
Sinha said that the global economic landscape remains challenging amid the ongoing West Asia tensions and uncertainty around resolution of the conflict. “Looking ahead, the external volatilities could keep the industrial activity under pressure warranting some policy support,” she concluded.
Source: Business Standard
