New Delhi: India’s industrial activity gathered pace in May as manufacturing-led growth offset weakness in mining, offering fresh evidence that domestic demand and investment spending continue to support the economy despite an uncertain global backdrop.
The Index of Industrial Production (IIP) expanded 5.1% year-on-year in May, marginally faster than the revised 4.9% growth recorded in April under the new 2022-23 base series, according to quick estimates released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday. The index stood at 122.7 in May, compared with 116.7 a year earlier.
Manufacturing, which accounts for the largest share of the IIP, grew 5.5%, reaffirming its position as the principal engine of industrial expansion. Electricity and gas supply posted the fastest growth among the major sectors at 9.9%, reflecting sustained energy demand from industries and households. Water supply, sewerage and waste management also expanded 5.5%, while mining and quarrying declined 1.6%, making it the only major sector to contract during the month.
The latest data indicate that India’s industrial recovery remains broad-based, with production strengthening across most manufacturing industries even as commodity-linked sectors continue to face uneven demand conditions. The fact that four of the five major industrial sectors registered positive growth highlights the resilience of domestic economic activity despite persistent uncertainties in global trade and commodity markets.
Investment Strengthens Further
The composition of industrial growth points to improving capital expenditure and sustained consumer demand.
Capital goods recorded the strongest expansion among use-based categories, rising 12.9% in May, signalling healthy investment activity by businesses. Consumer durables increased 7.2%, suggesting resilient discretionary spending, while infrastructure and construction goods grew 5.9%, reflecting continued momentum in public and private infrastructure projects. Intermediate goods rose 5.8%, consumer non-durables expanded 3.6%, and primary goods registered 2.6% growth.
The sharp rise in capital goods production is closely watched by economists as it is considered a proxy for fresh investment in factories, machinery and productive capacity. Meanwhile, steady growth in infrastructure and construction goods suggests that government-led capital expenditure and ongoing private sector projects continued to support industrial demand during the month. The expansion in consumer durables also indicates that urban consumption remained relatively healthy, helped by demand for automobiles and household appliances.
Within manufacturing, 16 of the 23 industry groups reported positive growth, underscoring the breadth of the recovery. Electrical equipment emerged as the best-performing segment, expanding 20.8%, supported by higher production of switchgear, transformers and uninterruptible power supply systems. Motor vehicles, trailers and semi-trailers grew 14.5%, driven by passenger vehicles, commercial vehicles and auto components, while basic metals advanced 4.6% as output of steel products such as hot-rolled coils, plates, bars and rods increased.
MoSPI said intermediate goods, capital goods and primary goods together made the largest contribution to overall industrial growth during the month, reflecting robust activity across the production value chain rather than a recovery concentrated in a handful of sectors.
Methodology Modernised Significantly
Alongside the latest data release, the government unveiled an important methodological upgrade aimed at improving the accuracy of industrial production estimates.
MoSPI has adopted the Output Producer Price Index (Output PPI) as the deflator for compiling the revised IIP series with base year 2022-23, replacing the Wholesale Price Index (WPI) for manufacturing items where production is reported in value terms. The change affects 234 of the 463 item groups in the IIP basket, representing 36.02% of the overall index weight.
The ministry said the revised methodology would provide a more accurate estimate of real industrial output by better capturing price movements at the producer level. Unlike the WPI, which measures price changes at the wholesale level, the Output PPI is designed to better reflect prices received by producers, making inflation-adjusted production estimates more representative of actual manufacturing activity. Officials said the transition aligns India's industrial statistics with international best practices and is expected to strengthen the quality of future Gross Domestic Product (GDP) estimates.
The revised IIP series also broadens industrial coverage by incorporating emerging products and sectors, including improved representation of natural gas, rare earth elements and water supply activities, allowing the index to better capture structural changes in India’s industrial economy. The updated basket is intended to reflect the country’s evolving manufacturing landscape and changing production patterns more accurately.
The next set of industrial production data, covering June 2026, is scheduled for release on July 28 and will offer a clearer indication of whether the manufacturing-led momentum seen in May is translating into a sustained industrial recovery through the first quarter of the current financial year.