India’s Industrial Output Growth Eases to 6.7% in July, Supported by Manufacturing

India’s industrial output expansion eased to 6.7 per cent in July, down from 7.3 per cent in June, according to data released by the National Statistics Office. Despite the slower headline growth, manufacturing held firm during the month.

The July figures were supported by a 7.3 per cent growth rate in the manufacturing sector alongside an 8.7 per cent expansion in the electricity and gas supply sector. Within manufacturing, 19 out of 23 industry groups recorded positive year-on-year growth in July. Conversely, the mining and quarrying sector contracted by 0.9 per cent, compared to a 10.7 per cent growth rate recorded a year ago, with analysts pointing to the monsoon effect as a contributing factor.

Rajni Thakur, Chief Economist at L&T Finance, noted that the data confirms sustained economic momentum. She highlighted that a 16 per cent growth in capital goods production, 10 per cent growth in intermediate goods, and an 11 per cent growth in consumer durables production reflect broad-based strength in industrial activities.

However, analysts observed a distinct divergence between discretionary spending and everyday consumption. Rajeev Sharan, Head of Research at Brickwork Ratings, pointed out that consumer durables such as vehicles and appliances grew by 10.5 per cent, whereas everyday goods like food and toiletries fell by 1 per cent. Factory output data echoed this trend, with motor vehicles rising by 22.2 per cent and electrical equipment up 28.3 per cent, while food products grew by only 2.6 per cent and clothing fell by 0.6 per cent. Sharan noted that this indicates discretionary and credit-linked purchases remain strong, while everyday items tied to rural incomes and real wages remain weak.

Within the industrial group covering the manufacture of motor vehicles, trailers, and semi-trailers, specific item groups including auto components, spares and accessories, passenger cars, and commercial vehicles made significant contributions to the growth.

Looking ahead, economists suggest that overall growth for the fiscal year could reach between 7 and 8 per cent, largely contingent on a strong rebound during the upcoming festive season. Madan Sabnavis, Chief Economist of Bank of Baroda, stated that for the first four months, growth has been led by manufacturing at 7 per cent and electricity at 8.7 per cent, and that future IIP growth will depend on whether festival demand matches the strength seen in the previous year.

"The moderation in industrial output growth to 6.7 per cent in July highlights a shifting consumption pattern, where discretionary and credit-linked purchases are outperforming everyday goods. For businesses and entrepreneurs, this divergence underscores the importance of tracking segment-specific consumer behavior rather than relying solely on headline numbers. As the market looks toward the festive season for a demand rebound, supply chains and manufacturing sectors catering to urban discretionary spending are well-positioned, while rural-linked segments warrant a cautious approach." — Dr. Shishir Gupta, Founder & CEO, StartupLanes