India's manufacturing sector continues to expand steadily in 2026, backed by strong domestic demand and rising investment activity.
India's Index of Industrial Production (IIP) grew 5.1% year-on-year in May 2026, the fastest pace in five months. Manufacturing led this growth at 5.5%, while electricity generation surged 9.9%. Mining and quarrying contracted 1.6%, with manufacturing industry groups posting positive growth rather than a few sectors driving the numbers alone.
Among individual segments, basic metals, motor vehicles (led by commercial vehicles), and non-metalic minerals such as cement showed the strongest gains earlier in the year. Capital goods output- machinery and equipment used to expand production capicity- grew 12.9% in May, a strong signal that businesses are investing for future growth rather than just meeting current demand.
The HSBC India manufacturing PMI stayed above the 50-mark expansion threshold throughout 2026, moving between 54.3 and 56.9. Rising input costs from energy and metal prices remained a persistent challenge, linked to ongoing Middle East tensions, though manufacturers passed on only part of these costs to customers.
Manufacturing remains India's top destination for corporate capital expenditure, accounting for over 50% of total CAPEX in FY2025-26. That share is expected to moderate slightly to around 44% in FY26-27 as investment also flows toward infrastructure and energy capacity.
MoSPI also introduced a revised IIP series in 2026, using 2022-23 as the new base year and the output producer price index instead of WPI, while expanding coverage to renewable energy and other emerging sectors.
