Union Bank sees September industrial output growth slowing to 6%

India's September industrial output growth expected to slow to 6% from 8% in August: Union Bank report

New Delhi, October 25

The forecast comes ahead of the government's September Index of Industrial Production (IIP) data, scheduled for release on October 28, and points to slowing industrial momentum despite continued support from domestic demand and a favourable base effect.

"Index of Industrial Production (IIP), expected to grew by 6.0% (y/y) in Sep'26, moderating from 8.0% (y/y) in Aug'26 due moderation in sequential momentum though favourable base-effect holds up," the bank stated in its research report.

A significant concern is the expected sharp moderation in capital goods production, which is projected to grow by just 2.2 per cent in September, compared with 16.9 per cent in August.

Capital goods, which include machinery and equipment used in production, are an important indicator of investment-related industrial activity.

Consumer durables growth is also expected to slow to 3.1 per cent from 11.1 per cent, indicating weaker momentum in these segments.

Among major sectors, manufacturing output growth is projected to moderate to 6.3 per cent from 9 per cent in August, while mining production is expected to contract by 8 per cent, compared with a decline of 5.6 per cent in the previous month.

However, electricity generation is expected to remain strong, with growth projected at 15.6 per cent against 12.3 per cent in August.

Despite the expected slowdown, the report noted that "High-frequency indicators suggest that overall economic activity continued to stay strong in September 2026."

Two-wheeler sales increased 33.4 per cent year-on-year in September, reflecting stronger rural consumer demand, while passenger vehicle sales grew 23.3 per cent.

Infrastructure and construction goods output is also expected to improve, with growth projected at 7.8 per cent compared with 6.4 per cent in August.

The bank noted that public investment and a recovery in private capital expenditure could support industrial activity, even as some segments show signs of moderation.

However, it cautioned about risks to growth in the coming months.

"Going forward, we have cautious outlook on rural demand amid weak monsoon and impact of cost-push price spikes," the report stated.

It also warned that global uncertainties and prolonged supply disruptions could affect the availability of critical inputs and weigh on manufacturing output.

The government's September IIP data, due on October 28, will provide a clearer picture of whether industrial growth is maintaining momentum or showing broader signs of moderation.

— ANI