Unexpected surge: On India’s industrial growth

India’s industrial growth held a positive surprise in February 2026, coming in at 5.2%, marginally faster than the growth in January. Apart from November and December last year, February’s industrial performance — as measured by the Index of Industrial Production (IIP) — was the best in nearly two years. Why this was a surprise was because this performance diverges quite sharply from what was indicated by the Index of Eight Core Industries released earlier this month. The eight core sectors — crude oil, natural gas, refinery products, coal, fertilizers, steel, cement, and electricity — saw their combined growth slow to 2.3% in February, about half the growth rate in January. These core sectors have a weightage of about 40% in the IIP, and so the expectation was that they would drag the IIP down too. Yet, something else happened. This would imply that sectors outside the core ones did well. Most notably, the manufacturing sector in the IIP saw growth accelerate to a respectable 6% in February. The capital goods sector’s growth accelerated to a 28-month high of 12.5%, on an already strong base of 8.1%. These are good signs for labour and capital. What is more concerning is that some elements of consumer demand are going in the opposite direction. Consumer durables grew 7.3%, but consumer non-durables contracted 0.6%, the second consecutive month of shrinkage. It had contracted in February last year as well, so this was not a statistical anomaly.

In general, spending on non-durables involves greater discretion on a day-to-day basis, and so is a better gauge of consumer sentiment. At the moment, at least this data suggest that sentiment is low. This also correlates with the new series of national accounts data showing that household expenditure has had a shrinking contribution to GDP. The government should also look into why the IIP and the Eight Core Industries index moved in opposite directions in February. The two are normally highly correlated, and so a divergence is immediately noteworthy. From the looks of things, February’s strong IIP performance is likely to be a short-lived acceleration. The West Asia crisis is already having an impact on the economy. The monthly economic review by the Finance Ministry has said that early high-frequency economic indicators for March are pointing towards a “moderation in economic momentum”. The longer the war persists, the sharper this “moderation” is likely to be. On a positive note, while what is being measured might turn dismal, how it is being measured will soon improve. The new, upgraded series of IIP data will be released in May. As the new GDP and CPI have done, the new IIP is sure to provide a clearer picture of the economy — the good and the bad.