Industrial Growth Projected to Slow to 6% in September Amid Declines in Capital Goods and Mining Sectors
India’s industrial production growth is expected to slow to 6% in September 2026, down from 8% in August. This decline is attributed to a significant drop in capital goods output and a sharper contraction in mining, according to a report by Union Bank of India. Despite this moderation, several indicators of economic activity, such as vehicle sales and infrastructure-related goods, remain robust. The government’s Index of Industrial Production (IIP) data for September is set to be released on October 28.
Capital goods growth seen falling sharply
The report indicates that capital goods production will experience the most pronounced slowdown, with growth projected at 2.2% in September, a steep decline from 16.9% in August. Capital goods encompass machinery and equipment used in production, serving as a key indicator of investment-related industrial activity. Consumer durables are also expected to see a decrease, with output growth forecast to fall to 3.1% from 11.1% in the previous month. Manufacturing growth is anticipated to ease to 6.3% in September from 9% in August, while mining production is expected to contract by 8%, compared to a 5.6% decline in August. In contrast, electricity generation is projected to maintain strong performance, with growth expected to rise to 15.6% in September from 12.3% in August.
Vehicle sales and infrastructure goods remain firm
Despite the anticipated slowdown in industrial production, high-frequency indicators suggest continued strength in overall economic activity. Two-wheeler sales surged by 33.4% year-on-year in September, driven by robust rural consumer demand, while passenger vehicle sales increased by 23.3%. Additionally, infrastructure and construction goods are projected to see improved growth, with output expected to rise by 7.8% in September, up from 6.4% in August. The bank noted that public investment and a recovery in private capital expenditure could bolster industrial activity, even as some sectors face a downturn.
Weak monsoon and supply disruptions pose risks
The outlook for the upcoming months carries risks, particularly concerning rural demand. The report highlights the weak monsoon and cost-push price spikes as factors that could impact economic activity. The bank expressed a cautious outlook on rural demand due to these challenges. Furthermore, global uncertainties and prolonged supply disruptions may affect the availability of critical inputs, potentially weighing on manufacturing output. The September IIP data, scheduled for release on October 28, will provide an official assessment of industrial production during the month, in light of the bank’s forecast for slower growth.
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