India's Industrial Output Growth Set to Dip to 6% in September
Union Bank report predicts a dip in India's industrial output growth for September, citing a sharp slowdown in capital goods.
India's industrial momentum appears to be losing some steam. According to a recent research report by Union Bank of India, the country's India industrial output growth is expected to moderate to 6 per cent in September 2026, a noticeable drop from the 8 per cent growth recorded in August.
This forecast arrives just ahead of the official September Index of Industrial Production (IIP) data, which the government is scheduled to release on October 28. While a favourable base effect continues to provide some support, the bank suggests a moderation in sequential momentum is taking hold.
The Red Flags: Capital Goods and Mining
The report highlights a concerning trend in capital goods production—machinery and equipment essential for production—which serves as a critical barometer for investment activity. Growth in this sector is projected to plummet to just 2.2 per cent in September, a staggering decline from the 16.9 per cent growth seen in August.
Other sectors are also showing signs of weakness:
- Consumer Durables: Growth is expected to slow down to 3.1 per cent, compared to 11.1 per cent in the previous month.
- Manufacturing: Output growth is projected to moderate to 6.3 per cent from August's 9 per cent.
- Mining: This sector continues to struggle, with an expected contraction of 8 per cent, deepening the 5.6 per cent decline seen in August.
The Silver Linings: Power and Passenger Vehicles
Despite the overall slowdown, not all indicators are pointing downward. Electricity generation remains a powerhouse of growth, with projections suggesting a rise to 15.6 per cent, up from 12.3 per cent in August.
Furthermore, high-frequency indicators suggest that the broader economic activity remained robust throughout September. A significant surge in automotive sales points toward resilient demand:
- Two-wheeler sales: Jumped by 33.4 per cent year-on-year, signaling a recovery in rural consumer demand.
- Passenger vehicle sales: Grew by 23.3 per cent.
- Infrastructure and Construction: Output in these goods is expected to improve, growing by 7.8 per cent compared to 6.4 per cent in August.
Looking Ahead: Risks and Recovery
Union Bank notes that while public investment and a potential recovery in private capital expenditure could bolster industrial activity, the road ahead is not without hurdles. The bank has expressed a cautious outlook regarding rural demand, citing the impact of a weak monsoon and cost-push price spikes.
Additionally, the report warns that global uncertainties and prolonged disruptions in the supply chain could hinder the availability of critical inputs, which may further weigh down manufacturing output.
All eyes are now on October 28, when the government's official IIP data will reveal whether India's industrial sector is merely experiencing a temporary dip or a broader trend of moderation.