Weak monsoon, El Nino pose risks to industrial growth despite strong May performance: Experts on IIP data
New Delhi, June 29
Economists have cautioned that weak monsoon progress, El Nino conditions and global uncertainties could weigh on India's industrial growth in the coming months, even as the country's industrial output accelerated to a five-month high of 5.1 per cent in May 2026.
The latest data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday showed that the Index of Industrial Production (IIP) grew 5.1 per cent in May, supported by a 5.5 per cent rise in manufacturing output and a robust 9.9 per cent increase in electricity generation.
Despite the improvement, experts flagged several risks that could affect industrial activity going forward.
Dipti Deshpande, Principal Economist at Crisil Ltd, said industrial production could soften in the coming months as manufacturing and construction sectors continue to face high costs for key imported inputs.
"We expect industrial production to turn somewhat softer in the coming months. Manufacturing and construction face high-cost pressure on key imported inputs. Even if shipping resumes through the Strait of Hormuz, repairs to the damaged oil and gas infrastructure in West Asia will take time and elevated war risk premiums, among other factors, would keep pressure on input costs," she said.
Deshpande also highlighted weather-related concerns, noting that a below-normal monsoon could affect rural demand.
"The all-India rainfall has been 42 per cent below normal until June 29. Against this backdrop, we expect gross domestic product (GDP) growth to slow to 6.6 per cent this fiscal from 7.7 per cent last fiscal," she added.
Rajani Sinha, Chief Economist at CareEdge Ratings, said the increase in industrial output was supported by better performance in electricity and gas supply, while manufacturing and water, sewerage and waste management sectors also recorded healthy growth.
She noted that 16 of the 23 manufacturing sub-sectors registered growth, led by textiles, paper products, fabricated metals, electrical equipment, machinery and automobiles.
However, Sinha said the sustainability of the recovery in consumption needs close monitoring amid geopolitical uncertainty, inflationary pressures and slow monsoon progress.
"On the domestic front, weather-related risks are increasing due to the slow progress of the monsoon amid El Nino conditions. A weaker monsoon could pose a threat to the consumption and inflation outlook," she said.
Ranjeet Mehta, Secretary General and CEO of PHDCCI, said the broad-based growth in capital goods, infrastructure-related industries and consumer durables is encouraging for India's medium-term growth prospects.
He said, "The broad-based expansion across capital goods, infrastructure-related industries and consumer durables is encouraging for India's medium-term growth prospects. Government's continued focus on infrastructure development, manufacturing competitiveness, logistics efficiency and ease of doing business has helped sustain industrial momentum and strengthen India's position in global value chains."
Meanwhile, Shashwat Singh of Bajaj Broking noted that capital goods recorded the strongest growth among use-based sectors at 12.9 per cent, reflecting continued investment activity in the economy.
He said, "The Growth in industrial activity quickened to a five-month high of 5.1 per cent in May 2026, buoyed by stronger performances by the manufacturing, electricity, capital goods, and consumer goods sectors".
Overall, experts said that while May's industrial output data reflects resilience in manufacturing and infrastructure-linked sectors, industrial activity will need to navigate global uncertainties, high input costs and weather-related challenges in the months ahead.
— ANI
Reader Comments
I work in manufacturing and we are definitely feeling the pinch of imported input costs. Shipping issues in West Asia are no joke. When will India become Atmanirbhar in critical raw materials? We can't keep relying on global supply chains that break every time there's a geopolitical issue.
Finally some good news for capital goods sector! 12.9% growth shows our infrastructure push is working. But we need to be careful - El Nino could mess up everything. Last time during weak monsoon, we had high food inflation and RBI had to hike rates. Hope the government has contingency plans ready. 🤞
The GDP growth slowing from 7.7% to 6.6% prediction is concerning. We need to maintain at least 7% to create jobs for our youth. Maybe the government should focus more on improving logistics and reducing import duties for key manufacturing inputs. China is still way ahead in manufacturing competitiveness.
Interesting to see textile and auto sectors doing well. But I'm worried about the high cost pressures. If the rupee weakens further against the dollar, our import bill will skyrocket. The RBI needs to manage currency volatility carefully. Monsoon risks are real - just look at the 42% rainfall deficit so far.
I appreciate the government's focus on infrastructure but we need more inclusive growth. Smaller manufacturing units in Tier-2 and Tier-3 cities are struggling with high electricity costs and raw material prices. Subsidies for MSMEs would help a lot. Aur haan, kisan ki fikr bhi karo please! 🌾
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