IIP GROWTH FOR JULY 2026 – BASE EFFECT PLAYS SPOILSPORT

IIP GROWTH FOR JULY 2026 – BASE EFFECT PLAYS SPOILSPORT

After rising for 3 months in a row, the index of industrial production (IIP) tapered in July. However, the fall does look magnified because of the upward revision of June numbers. In fact, the June IIP was upgraded sharply from the originally announced 7.32% to 8.88%; a 150-basis point upgrade. One has to wait and see if July IIP also gets upgraded.

When we talk of lower IIP in July 2026, the base effect played a big part. Between June 2025 and July 2025, the IIP moved up sharply from 2.23% to 5.41%. Hence, the fall in IIP looks more pronounced. Also, the fall in IIP in July 2026 has been triggered by contraction in mining; while manufacturing, electricity, and water supply output continue to be robust.

Data Source: MOSPI

What are the key takeaways from the July 2026 IIP data?

For the month of July, mining output against dipped into negative. While manufacturing and electricity output continued to be robust, they are lower than the levels recorded in June 2026 by 200 bps to 250 bps.

Manufacturing IIP growth was robust at 7.3% in July 2026; largely helped by electrical equipment, motor vehicles, machinery, transport equipment, beverages, plastics, and non-metallic minerals. Manufacturing has weightage of 76.06% in the overall IIP basket.

On the mining front, rare earths continued to show robust growth, while fuel oils and other minerals were under pressure. In electricity, renewable energy again dominated thermal power, while the gas supply continue to contract in July 2026.

Water supply showed robust growth in waste and sewerage management and a more modest growth in core water supply. In terms of overall IIP, the 6.67% growth must be looked at through the lens of the negative base effect, which makes it a good number.

Let us now turn to the granular growth of the 4 sub-baskets in the IIP story.

JULY 2026 AND FY27 IIP: DISSECTING IIP BASKET

The table the new series IIP growth for last 3 months, with the FY27 update.

The cumulative growth for FY27 still has limited representative value as the data is just for 4 months. However, the good news is that the positive IIP growth traction is coming from across manufacturing, electricity, and water supply; while mining is still a drag!

KEY TAKEAWAYS FOR INVESTORS FROM IIP DATA

One must remember that these numbers are the real IIP growth. In the case of IIP growth, the PPI Inflation (recent version of WPI) is used as the IIP deflator. That figure has been closer to 9% in recent months. Once WPI inflation comes under control, the real IIP growth will automatically get a boost. That can be a positive driver.

Let us look at the momentum drivers in manufacturing, which has a weight of over 76% in the IIP basket. The positive thrust came from products like electrical equipment, machinery, other transport equipment, beverages, rubber & plastic products etc. Select, export-sectors are showing signs of revival in demand, despite geopolitical risk.

What about negative momentum drivers of IIP in the month of July 2026? There was pressure on tobacco products, pharmaceuticals, chemicals, and wearing apparel. Some segments of exports have apparently been hit by the rising geopolitical risk. Higher shipping costs and geographical restrictions have also played a part.

The IIP figure for July is commendable as it comes on the back of a deep negative base effect. Also, the revised July figure will give a better picture. The bottom-line is that IIP is surely holding up despite the global supply chain constraints.