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 percent 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 percent of total CAPEX in 2025-26, though its share is expected to moderate to 44.35 percent in 2026-27.

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.

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

India’s Purchasing Managers’ Index (PMI)

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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.

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 normalization following strong growth in late 2025, rather than any structural slowdown.

India’s manufacturing sector showed stronger momentum in May, with the PMI rising to 55.0, up from 54.7 in April and exceeding the preliminary estimate of 54.3. The improvement was driven by faster growth in production, increased purchasing activity, and a build-up in finished goods inventories.

Demand within the domestic market remained the main growth driver, helping boost new orders, while export demand grew at a slower pace compared to previous months.

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.

Source: Press Information Bureau

April 2026: First release under the revised base year

India’s industrial output grew 4.9 percent 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 percent, while capital goods production rose strongly, reflecting continued investment activity.

The revised IIP framework, released on June 1, 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 percent in January 2026, driven by continued growth in manufacturing and infrastructure-linked industries such as metals, automobiles, and cement. Growth strengthened to 5.2 percent in February, supported by robust performance in capital goods and infrastructure/construction goods, reflecting sustained investment activity. However, industrial expansion moderated to 4.1 percent 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 percent 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 percent in Q1 and 9.13 percent 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 percent 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:

Source: Expenditure profile 2026-27; Central sector schemes

Budget allocations indicate a clear prioritization 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

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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.

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

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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 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 March 27, 2026. It was updated on June 1, 2026.)

Entering or expanding in India requires careful assessment of market conditions, regulatory frameworks, and sector competitiveness. Business intelligence insights help companies evaluate opportunities, benchmark competitors, and align investment strategies with India’s evolving economic landscape.

Koushan Das

Manager

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