Industrial output jumps to 26-month high of 7.8% in December

New Delhi: India’s industrial production growth accelerated to an over two-year high of 7.8% in December, driven by robust consumption demands, as per official data on Wednesday.

Manufacturing sector growth accelerated to 8.1%, while electricity and mining posted 6.3% and 6.8% growth, respectively, on a year-on-year basis.

The factory output measured in terms of the Index of Industrial Production (IIP) grew 7.2% in November. In December 2024, the IIP growth stood at 3.7%, data released by the Ministry of Statistics & Programme Implementation showed. The December 2025 expansion was the best in 26 months.

Manufacturing growth was led by a boost in domestic consumption. However, export-oriented sectors posted subdued performance.

“Within manufacturing, GST rationalisation benefited sectors such as food products and automobiles, but export-oriented sectors such as apparel, textiles saw IIP growth moderate,” said Dipti Deshpande, Principal Economist, Crisil.

All six used-based sectors continued to remain in expansion for the second successive month in December 2025. More importantly, the consumer non-durables sector grew 8.3%, the highest in the last 26 months.

“High consumer non-durable growth post festive season (at a 13-month high) suggests: the inventories both with wholesaler and manufacturer have exhausted and according to the manufacturer’s assessment, the demand is likely to continue,” said Paras Jasrai, Associate Director, India Ratings and Research (Ind-Ra).

“These numbers have given some anecdotal evidence that the GST rationalisation has pushed demand in the economy. This coupled with low inflation would continue to push demand,” Jasrai added.

Capital goods and infrastructure sectors posted 8.1% and 12.1% growth, respectively. This indicates that investment demands have also remained steady.

On a quarterly basis, the factory output touched a six-quarter high of 5.2% year-on-year during the October-December 2025 period.

“Going forward, while domestic tailwinds should support demand in consumer segments for a few more quarters, the adverse impact of higher US tariffs on export segments could get more pronounced,” said Deshpande.

However, a trade deal with the US, reducing the tariff to closer to levels faced by peers, could help matters, she added.

On the GDP growth, Deshpande said it is likely to moderate to 6.7% in 2026-27, from the National Statistics Office estimate of 7.4% in the current fiscal.

“We have to be watchful of the revival witnessed in the IIP growth, and monitor it for a couple of quarters to term it as industrial recovery. The factor output growth has been observed to grow in excess of 5% for a couple of quarters, before fizzling out. The new IIP with a base year of 2022-23 will portray a correct picture of industrial production,” said Jasrai.

With a high base effect in January 2025, Ind-Ra expects the IIP growth to moderate to around 5% in January 2026.