Despite easing West Asia tensions, India's Industrial production growth outlook remains cautious: BoB Report
New Delhi, June 29
India's industrial production growth is expected to remain cautious for the full 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.
The report said 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.
It stated, "Complete normalisation of supply chains will take months, hence we maintain cautious view on our full year IIP growth forecast".
According to the report, the improvement in industrial output was primarily 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.
The report noted that manufacturing growth stood at 5.5 per cent in May 2026, supported by sectors such as textiles, basic metals, fabricated metals and motor vehicles.
Bank of Baroda said the latest industrial production data is based on the revised base year, which has been changed from 2011-12 to 2022-23.
The report also highlighted that the production of consumer durables continued to improve. It attributed the rise to the ongoing heatwave and uneven distribution of the monsoon, which have kept demand elevated.
Looking ahead, the report expects industrial production to gain some momentum in the coming months as geopolitical tensions in West Asia have eased considerably.
According to the report, the reopening of the Strait of Hormuz and the decline in oil prices are expected to gradually lower input costs for industries. Supply-side pressures are also likely to improve as trade routes become more accessible.
However, Bank of Baroda cautioned that the process of restoring normal supply chains will take time.
"With the re-opening of the Strait of Hormuz and decline in oil prices, the cost of inputs is expected to come down gradually and supply pressures are also expected to improve. However, it is estimated that it will still take couple of months before all the backlogs can be cleared and supply chains are fully normalised. We thus maintain cautious view on our full year growth forecast," the report said.
The report 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.
— ANI
Reader Comments
The heatwave is a double-edged sword - it's boosting demand for consumer durables like coolers and ACs, but it's also a reminder of climate change. And with El Nino looming, our agriculture sector could be hit hard. The report says monsoon distribution is uneven - that's worrying for our farmers. We need to balance industrial growth with climate resilience.
I work in the auto sector and we're seeing some recovery in demand for vehicles, especially two-wheelers. But raw material costs are still high due to supply chain issues. The reopening of Strait of Hormuz is a positive step, but as the report says, it'll take months for full normalisation. At least oil prices are cooling - that should help our import bill and inflation.
The revised base year from 2011-12 to 2022-23 is a welcome change. It makes the index more relevant to current economic conditions. The 5.1% growth in May 2026 is decent, but to sustain it, we need more infrastructure spending and policy stability. Let's hope the government continues its focus on 'Make in India' and attracts more FDI.
Good to see growth in textiles and basic metals - these are core sectors that employ millions. But I'm concerned about the mining decline. We need to ramp up domestic mining to support our manufacturing ambitions. Also, the report's cautious stance is wise - global uncertainties are still high. Let's not pop any champagne bottles yet.
As an economist, I appreciate the nuance in this report. The Bank of Baroda is
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