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

India’s industrial production growth accelerated to a 26-month high of 7.8% in December, supported by strong domestic consumption demand, official data released by the Ministry of Statistics and Programme Implementation (MoSPI) showed on Wednesday.Factory output, measured by the Index of Industrial Production (IIP), rose sharply from 7.2% in November. In comparison, industrial output growth stood at 3.7% in December 2024, highlighting a strong year-on-year acceleration. The December 2025 reading marked the fastest pace of expansion in over two years.The manufacturing sector, which accounts for over three-fourths of the IIP basket, recorded an 8.1% growth in December, up from the previous month. Electricity generation and mining output also posted robust growth of 6.3% and 6.8%, respectively, on an annual basis.
Crisil Principal Economist Dipti Deshpande said the improvement in manufacturing activity was driven largely by domestic consumption. “Within manufacturing, GST rationalisation benefited sectors such as food products and automobiles, but export-oriented sectors such as apparel and textiles saw IIP growth moderate,” she stated.Data showed that all six use-based categories remained in expansion territory for the second consecutive month in December. Consumer non-durables emerged as a key driver, growing 8.3%—the highest level in 26 months.
Paras Jasrai, Associate Director at India Ratings and Research (Ind-Ra), said the strong post-festive performance pointed to improving demand conditions. “High consumer non-durable growth post festive season suggests inventories with wholesalers and manufacturers have been exhausted, and manufacturers expect demand to continue,” he said. Jasrai added that GST rationalisation, combined with low inflation, has provided an additional push to consumption demand.Investment-related segments also showed resilience. Capital goods output rose 8.1%, while infrastructure and construction goods recorded a strong 12.1% growth, indicating steady investment momentum in the economy.
On a quarterly basis, industrial production growth touched a six-quarter high of 5.2% year-on-year during the October–December 2025 period.
Looking ahead, Deshpande said domestic factors are likely to support consumer demand over the next few quarters, though external risks persist. “The adverse impact of higher US tariffs on export segments could get more pronounced,” she said, adding that a trade deal with the US bringing tariffs closer to peer levels could provide relief.
On the broader macro outlook, Deshpande said GDP growth is expected to moderate to 6.7% in 2026-27, compared with the National Statistics Office’s estimate of 7.4% for the current fiscal year.Jasrai, however, cautioned against drawing firm conclusions from a single data point. “We need to be watchful of the revival in IIP growth and monitor it for a couple of quarters to term it an industrial recovery,” he said, noting that the upcoming IIP series with a 2022-23 base year may offer a clearer picture of underlying industrial trends.
Ind-Ra expects industrial output growth to moderate to around 5% in January 2026, partly due to a high base effect from January 2025.

(Business Correspondent)