India’s Industrial Output Raises Questions Despite Growth

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India's Industrial Output Raises Questions Despite Growth

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India’s industrial output saw a notable increase, reaching a five-month high of 5.1% in May 2026, building on a 4.9% growth in April. This upward trend follows a period of impact from the West Asia crisis. The manufacturing sector played a significant role, growing by 5.5% in May, though this was a slight decrease from April.

The Ministry of Statistics and Programme Implementation (MoSPI) introduced a major change in how it calculates growth for some sectors. They transitioned from using the Wholesale Price Index (WPI) to the Output Producer Price Index (Output PPI) as the deflator for estimating the value of production in 234 out of 463 item groups, representing 36.02% of the total index weight. This change, implemented for the new 2022-23 base-year series, aims to provide a more accurate and granular price structure.

Despite the positive headline figures, concerns have been raised regarding the composition of this growth. While some suggest a revival in domestic consumption, particularly in consumer durables, others argue that export growth is the primary driver, pointing to slower growth in Goods and Services Tax (GST) revenues from domestic transactions over the last six months compared to previous years. Merchandise exports, conversely, reached a four-year high in April and an all-time high in May. Additionally, the strong IIP growth appears to be at odds with the Index of Eight Core Sectors, a separate government measure,

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