India's industrial production growth is expected to stay cautious for the full financial year, as complete normalisation of supply chains could take several months despite easing geopolitical tensions in West Asia, according to a report by Bank of Baroda.
May 2026 IIP Growth Higher Than Previous Year
The report noted that industrial production registered a growth of 5.1 per cent in May 2026, higher than the 3.4 per cent growth recorded in May 2025. The improvement was largely driven by stronger performance in the manufacturing sector and electricity generation. However, mining growth declined, while water supply, sewage and electricity output recorded some deceleration.
Manufacturing growth stood at 5.5 per cent in May 2026, supported by sectors such as textiles, basic metals, fabricated metals and motor vehicles, the report stated.
Supply Chain Normalisation Will Take Time
The report cautioned, "Complete normalisation of supply chains will take months, hence we maintain cautious view on our full year IIP growth forecast." It added that with the reopening of the Strait of Hormuz and decline in oil prices, input costs are expected to come down gradually and supply pressures should improve. However, it estimated that it will still take a couple of months before all backlogs can be cleared and supply chains are fully normalised.
Bank of Baroda also highlighted that the latest industrial production data is based on a revised base year, changed from 2011-12 to 2022-23.
Consumer Durables and Electricity Demand Remain Elevated
The report noted that production of consumer durables continued to improve, attributing the rise to the ongoing heatwave and uneven distribution of the monsoon, which have kept demand elevated. It added that uneven monsoon distribution and the impact of El Nino are expected to continue supporting production of consumer durables and electricity generation in the near term, unless the spread of the monsoon gathers pace.
Looking ahead, the report expects industrial production to gain some momentum in the coming months as geopolitical tensions in West Asia have eased considerably. However, it maintained a cautious view on the full-year growth forecast.
