India Manufacturing Tracker 2026

India Briefing brings you the new Manufacturing Tracker for 2026, establishing the essential parameters of industrial growth, sectoral updates, and economic progress.

The trends across 2025 suggest that India’s manufacturing sector is demand-supported and investment-driven but operationally uneven. The numbers point to a transition phase, where policy momentum and capital inflows are building a foundation for long-term growth, but short-term performance remains subject to volatility and structural bottlenecks.

Industrial production shows resilience under revised IIP series

The central government has unveiled a revised Index of Industrial Production (IIP) series, which adopts 2022-23 as the new base year. According to the assessment, the industrial sector commenced FY 2026-27 positively, with industrial production increasing by 4.9 per cent in April 2026. This exceeds market expectations despite ongoing geopolitical disruptions and elevated energy costs stemming from the conflict in the Middle East.

The April figures are the first to be released under the latest IIP series; therefore, direct comparisons with earlier growth rates under the previous series are not meaningful.

India’s manufacturing CAPEX outlook (2025-27)

Private corporate CAPEX trends indicate that manufacturing remains the largest recipient of investment, accounting for over 50 per cent of total CAPEX in 2025-26, though its share is expected to moderate to 44.35 per cent in 2026-27.

Sectoral Distribution of CAPEX
Sector	2025–26	2026–27
Manufacturing	50.17%	44.35%
Information & communication	16.38%	14.38%
Electricity, gas & AC supply	8.96%	14.94%
Transportation & storage	5.55%	5.53%
Others	18.94%	20.80%
Total CAPEX	INR 11.4 trillion (US$120.3 billion)	INR 9.55 trillion (US$100.8 billion)

Source: Ministry of Statistics and Program Implementation

This decline does not signal weakening fundamentals but rather a rebalancing toward infrastructure, particularly a sharp rise in energy-sector investments, reflecting growing industrial power requirements.

In absolute terms, manufacturing CAPEX rises significantly in 2024-25 and 2025-26 before easing in 2026-27.

Manufacturing CAPEX Trend
Year	CAPEX	Trend
2024-25	INR 2.45 trillion (US$24.8 billion)	Base
2025-26	INR 2.98 trillion (US$31.45 billion)	Strong expansion
2026-27	INR 2.73 trillion (US$28.81 billion)	Moderate decline

This trend suggests that the sector is reaching the peak of its investment cycle, followed by a phase of normalisation rather than contraction, in line with a broader moderation in overall CAPEX.

India’s Purchasing Managers’ Index (PMI)

Business sentiment in India’s manufacturing sector remains firmly positive, providing a forward-looking signal of continued industrial expansion into the upcoming financial year. The Manufacturing PMI has consistently stayed above the 50-point threshold, indicating sustained growth in production, new orders, and overall business activity.

India’s PMI month-on-month	Output (%)
August 2026	52.8
July 2026	53.5
June 2026	54.2
May 2026	55.0
April 2026	54.7
March 2026	53.9
February 2026	56.9
January 2026	55.4
December 2025	55.0

Source: HSBC India Manufacturing PMI

2026 data reflects a gradual moderation in momentum. While the PMI remains in expansion territory, the slight decline suggests a normalisation following strong growth in late 2025, rather than any structural slowdown.

India’s IIP trends – 2026

In India, the Index of Industrial Production (IIP) tracks the growth rates of three key sectors—mining, manufacturing, and electricity—on a month-on-month basis.

Index of Industrial Production (IIP) 2026 – New series (Base Year: 2022–23)
Month	Overall IIP growth (YoY)	Manufacturing growth (YoY)	Mining growth	Electricity growth	General IIP index	Manufacturing index
July 2026	6.7%	7.3%	-0.9%	8.7%	124.8	127.4
June 2026	8.8%	9.5%	1.6%	11.3%	124.8	125.3
May 2026	5%	5.2%	-1.4%	10.3%	122.5	122.2
April 2026	4.9%	6.1%	-3.8%	4.6%	118.2	118.7

Source: Index of Industrial Production, Ministry of Statistics and Programme Implementation (MoSPI)

July 2026: Manufacturing remains a key growth driver

India’s industrial output growth moderated to 6.7 per cent in July 2026, compared with 8.8 per cent in June. July recorded the second-highest growth in the IIP since December 2025. Manufacturing, along with electricity and gas supply, remained key contributors to overall industrial expansion. Manufacturing output grew 7.3 per cent in July 2026, easing from 9.5 per cent in June but significantly exceeding the 5.1 per cent growth recorded in July 2025. Growth was supported by strong performance across several industries, particularly electrical and non-electrical engineering, automobiles and other transport equipment, electronics, and plastic and rubber products.

June 2026: Continued growth

India’s industrial production grew 7.3 per cent year-on-year in June 2026, up from the revised 5.1 per cent recorded in May, reflecting stronger manufacturing activity and sustained investment demand. According to the latest IIP data, manufacturing output expanded 7.8 per cent, while electricity generation increased 10.6 per cent. Among manufacturing industries, electrical equipment, motor vehicles, and food products recorded the strongest growth, supported by higher production across key sectors. Overall, 19 of the 23 manufacturing industry groups registered positive annual growth, underscoring the broad-based expansion of India’s industrial sector.

May 2026: Overall IIP growth

India’s industrial output growth accelerated to a five-month high of 5.1 per cent year-on-year in May 2026, up from 4.9 per cent in April, driven mainly by strong performance in the electricity and gas supply sector. The May release also introduced a significant methodological update to the IIP. The central government has shifted its approach from using the Wholesale Price Index (WPI) to the Output Producer Price Index (Output PPI) as the deflator for the new 2022-23 base-year series, covering 234 of the 463 item groups.

In terms of manufacturing sector performance, 16 of the 23 manufacturing industry groups registered positive growth during May 2026.

April 2026: First release under the revised base year

India’s industrial output grew 4.9 per cent year-on-year in April 2026, marking the first official release of the revised Index of Industrial Production (IIP) series with 2022–23 as the new base year. Manufacturing remained the key growth driver, expanding 6.2 per cent, while capital goods production rose strongly, reflecting continued investment activity.

The revised IIP framework, released on 1 June 2026, adopts a chain-linked methodology, enabling more frequent updates to sectoral weights and improving the index’s ability to capture structural changes in the economy. The new series also expands coverage to include sectors such as renewable energy, rare earth minerals, gas distribution, water supply, sewerage, and waste management.

Industrial production remains resilient in Q4 FY 2025–26

India’s industrial sector maintained positive growth momentum during the final quarter of FY 2025–26, although the pace of expansion moderated toward the end of the fiscal year. The IIP expanded by 4.8 per cent in January 2026, driven by continued growth in manufacturing and infrastructure-linked industries such as metals, automobiles, and cement. Growth strengthened to 5.2 per cent in February, supported by robust performance in capital goods and infrastructure/construction goods, reflecting sustained investment activity. However, industrial expansion moderated to 4.1 per cent in March, as higher input costs and supply-chain disruptions associated with the West Asia conflict weighed on several manufacturing segments.

Role of the manufacturing sector in India’s GDP

As of 2025-26, manufacturing accounts for around 14 per cent of GDP, making it the largest component within the industrial sector. While this share remains modest compared to services, the sector’s importance lies in its ability to anchor industrial output and provide a base for diversified economic activity.

Recent macro indicators point to a strengthening manufacturing cycle. The sector recorded gross value added (GVA) growth of 7.72 per cent in Q1 and 9.13 per cent in Q2 FY 2025–26, highlighting strong expansion supported by infrastructure spending, capital investment, and policy support. This growth is accompanied by a gradual shift toward higher-value production, with medium- and high-technology industries contributing 46.3 per cent of manufacturing value added, indicating improving industrial sophistication.

Policy support 

India’s manufacturing ecosystem is supported by a comprehensive set of central government schemes, aimed at boosting domestic production, attracting investment, enhancing competitiveness, and building industrial infrastructure. These schemes can be grouped into key strategic areas:

No.	Sectors	Budget estimates 2026-27 (Value in INR billion)
1	Automobiles and auto components	59.39 (US$626.9 million)
2	Electronic/technology products	15.27 (US$161.18 million)
3	Scheme for footwear and leather sector	0.0001 (US$1,055.5)
4	White goods (ACs and LEDs)	10.03 (US$105.8 million)
5	Drones and drone components	–
6	Advanced Chemistry Cell (ACC) battery storage	0.86 (US$9.07 million)
7	Specialty steel	3.80 (US$40.11 million)
8	Textile products	4.05 (US$42.75 million)
9	Pharmaceuticals drugs	24.99 (US$263.79 million)
10	Food processing	11.99 (US$126.5 million)
11	Electronics Components Manufacturing Scheme (ECMS)	15 (US$158.33 million)
12	Telecom & networking products	19.89 (US$209.95 million)

Source: Expenditure profile 2026-27; Central sector schemes

Budget allocations indicate a clear prioritisation of high-impact sectors, including automobiles, electronics, and pharmaceuticals. The expansion of schemes like ECMS and continued Production Linked Incentive (PLI) support reflect a shift toward technology-intensive and value-added manufacturing.

Taxation reforms shaping India’s manufacturing landscape in 2026

India’s taxation framework for 2026 reflects a clear strategic pivot toward cost competitiveness, investment facilitation, and global integration of its manufacturing sector. The Union Budget 2026-27 and the Income Tax Rules, 2026, together introduce a mix of fiscal incentives, compliance reforms, and sector-specific support measures aimed at accelerating industrial growth.

Key Taxation Measures for Manufacturing
Reform area	Key measures	Implication for manufacturing
Corporate Tax	Reduction in MAT from 15% to 14%	Improves profitability and cash flows for manufacturers
Investment incentives	5-year tax exemption for non-residents supplying capital goods; semiconductor manufacturing notified as specified business	Encourages foreign investment and high-tech manufacturing
Customs duty rationalisation	Duty exemptions on inputs for electronics, lithium-ion batteries, aircraft components, and other critical sectors	Reduces input costs and boosts domestic value addition
Export facilitation	Expanded duty-free import limits; extended export timelines (up to 1 year)	Enhances export competitiveness and operational flexibility
Compliance & procedures	Decriminalisation of offences; extended revised return timeline (12 months); digital customs systems	Reduces compliance burden and improves ease of doing business
Trade & logistics	Duty deferral schemes; risk-based importer recognition; electronic cargo sealing	Improves liquidity and supply chain efficiency
SEZ & domestic market access	Concessional duty window for SEZ units to sell domestically	Enhances capacity utilisation and market access

Linkage with broader industrial strategy

Tax reforms are being reinforced by parallel policy initiatives, including:

• Continued push through PLI schemes
• Increased public capital expenditure to drive industrial demand
• Dedicated funding support such as the INR 100 billion (US$1.05 billion) MSME Growth Fund

This alignment ensures that fiscal incentives are complemented by investment and infrastructure support.

ALSO READ: India’s Union Budget 2026-27: Industrial Growth, Infrastructure Spending & Tax Reforms

Overall assessment: Manufacturing in transition

The combined data across growth, investment, and policy signals that India’s manufacturing sector is:

1. Investment-led, supported by strong CAPEX and infrastructure expansion
2. Structurally upgrading, with an increasing share of high-technology industries
3. Operationally uneven, with sector-specific growth patterns
4. Policy-backed, with targeted incentives and ecosystem development

(US$1 = INR 94.73)

(This article was originally published on 27 March 2026. It was updated on 4 September 2026.)