Industrial growth falls to 10-month low of 1.5% in June, Q1 expansion at three year low

IIP for June

India’s industrial output fell to a 10-month low of 1.5 percent in June from a revised 1.9 percent in May, official data released on July 28 shows. Industrial growth for the fiscal first quarter also remained subdued, marking its lowest expansion in the first quarter in nearly three years at just 2 percent.

"The deceleration was entirely led by mining, which reported a steeper contraction of 8.7 percent in the month as compared to the 0.1 percent dip seen in May 2025. Excess rains in the second half of June 2025 are likely to have weighed on mining output, while also leading to a contraction in electricity generation, although the extent of the same narrowed compared to the previous month," said Aditi Nayar, chief economist, ICRA.

Manufacturing performed better with growth picking up to 3.9 percent compared with 3.2 percent in the previous month.

A key drag on industrial performance was the core sector, which accounts for 40 percent of the Index of Industrial Production (IIP). Growth in the core sector slowed to 1.3 percent in Q1, compared to 6.3 percent in the year-ago period.

There was good news, however, on the use-based front, with only two of the four industries exhibiting contraction. Government capex helped construction goods sector to deliver another month of stellar performance with growth rising to 7.2 percent compared with 6.7 percent in the previous month.

Consumer durables growth picked up to 2.9 percent from -0.9 percent in the previous month, while intermediate goods industries expanded at 5.5 percent from 4.7 percent in May.

Non durables continued to exhibit contraction for a fifth consecutive month in May at 0.4 percent from 1 percent in the previous month, while primary goods contraction widened to 3 percent.

There was a sharp slowdown in capital goods growth to 3.5 percent from 13.3 percent the previous month.

Economists expect India's industrial growth to remain muted in Q1. After expanding 7.4 percent in Q4 of FY25, the economy appears to be losing momentum in the first quarter of the new fiscal.

"ICRA expects the industrial GVA growth to decelerate in Q1 FY2026 from 6.5% uptick seen in Q4 FY2025," Nayar noted.

In its Monthly Economic Review for July, the finance ministry acknowledged the uneven growth pattern. “While the manufacturing and construction sectors continued to expand, the services sector anchored the overall economic growth in Q1 of FY26,” the report said.