Factory output growth slowed to 6.7 per cent in September from 7.8 per cent in August, government data showed on Wednesday. While mining fell, manufacturing and electricity sectors stayed strong. Aastha Gudwani said, “Industrial production data for September showed deceleration, but we do not think it points to a sharp loss.”
Factory output growth, based on Index of Industrial Production (IIP) slowed to 6.7 per cent in September as against 7.8 per cent of August, government data showed on Wednesday.
“In September 2026, the Index of Industrial Production recorded a 6.7 per cent year-on-year growth, supported by 7.6 per cent growth in the manufacturing sector and strong growth of 11.2 per cent in the electricity and gas supply sector,” an official release said on Wednesday.
“Industrial production data for September showed deceleration, but we do not think it points to a sharp loss of momentum,” said Aastha Gudwani, India Chief Economist at Barclays.
Further, year-on-year growth for industrial production is typically impacted by festival month mismatch and henceforth will also show impact of GST 2.0 (rates rationalisation in effect since September 2025, which impacted production and consumption decisions with lags).
“Capital goods and select manufacturing sectors continue to show relatively strong growth,” she said.
Downward drag
According to Pranjal Ghate, Economist, Brickwork Ratings, the finer details reveal that the downward drag was entirely driven by a 6.2 per cent contraction in the mining and quarrying sector, heavily disrupted by late monsoon conditions.
Conversely, manufacturing and electricity remained highly resilient, posting strong growth of 7.6 per cent and 11.2 per cent respectively. The surge in electrical equipment, rubber, plastics and motor vehicles points to robust industrial and business demand.
Furthermore, “the strong performance in the electricity segment was anchored by record solar production, which surged nearly 49 per cent, paired with strong thermal power and coal output to meet peak consumption demands,” he said.
Some economists also add base effect for moderation.
“Base effect and negative growth of mining sector pulled down September 2026 IIP growth. However, this is fourth consecutive month of more than 7.5 per cent manufacturing sector growth. Second consecutive month of double-digit electricity generation growth due to high temperature,” Devendra Pant, Chief Economist, India Ratings & Research said.
Capital goods
Further double-digit growth in capital goods production in 1HFY27 augurs well for investment activities in the economy. Barring consumer non-durable all other five used-base groups have sequential year-on-year decline in growth.
Consumer non-durable grew in September 2026 after two months of contraction, Pant said, while adding “Ind-Ra is of the view that IIP growth could improve in October 2026 in the range of 8-9 per cent due to base effect in the overall index and especially for manufacturing and electricity sector.”
Some economists see the impact of this print on GDP number too. With IIP growth accelerating to a robust 7.3 per cent in Q2 FY27 from 6.2 per cent in Q1 FY27, complementing the strength visible across high frequency indicators, “we anticipate GDP growth to exceed 7 per cent, in Q2 FY27, while moderating somewhat compared to the stronger-than-expected 7.8 per cent seen in Q1,” Aditi Nayar, Chief Economist at ICRA said.