Industrial output grows 8% in August 2026, but consumer non-durables lag at 2.1%
Factories are humming and capital goods are up 16.9%. So why are everyday consumer goods barely growing?
Published 29 September 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
India's Index of Industrial Production (IIP), which measures the change in the volume of industrial output, grew 8% in August 2026 over August 2025, according to data released by the National Statistics Office (NSO) under the Ministry of Statistics and Programme Implementation on 28 September 2026. July's growth was revised up to 7.4% from the first estimate of 6.7%. Business Standard described August's figure as the second-fastest growth in over two years. Growth for April to August 2026 was 6.7%, against 4.2% in the same months of 2025. This is the new IIP series with base year 2022-23, whose first release covered April 2026 data.
By sector, manufacturing, the heaviest component of the index, grew 9% (up from a revised 8.2% in July), electricity and gas supply 12.3% and water supply, sewerage and waste management 6.3%. Mining and quarrying shrank 5.6%, after contracting 0.9% in July. Within manufacturing, 18 of 23 industry groups grew, led by electrical equipment at 30.9%. By use-based category, capital goods grew 16.9%, intermediate goods 13.7%, consumer durables 11.1%, infrastructure and construction goods 6.4%, primary goods 3.5% and consumer non-durables only 2.1%.
Two cautions sit behind the headline. First, a base effect: the Indian Express notes that output in August 2025 was held down by inventory adjustments ahead of the GST rate cuts that took effect on 22 September 2025, so a year-on-year comparison flatters August 2026. Second, consumer non-durables, which include everyday fast-moving consumer goods (FMCG) such as packaged food, soaps and medicines, remain a slow spot. Bank of Baroda chief economist Madan Sabnavis linked weak demand to higher prices and low purchasing power. Strong capital goods and electrical equipment point to investment activity, while weak non-durables suggest mass consumption has not kept pace. The contrast matters for policy because sustained industrial growth needs both investment and broad-based demand.
Prelims facts
- The IIP grew 8% year-on-year in August 2026; July was revised to 7.4% from 6.7%.
- Manufacturing grew 9%, electricity and gas 12.3%, water supply and waste management 6.3%, while mining contracted 5.6%.
- Capital goods grew 16.9% but consumer non-durables only 2.1%.
- The new IIP series has base year 2022-23 and uses the Output Producer Price Index instead of the WPI as its deflator.
- The IIP is compiled and released by the National Statistics Office under MoSPI.
Quick recall
- Which body compiles and releases the IIP?
- The National Statistics Office (NSO), Ministry of Statistics and Programme Implementation.
- What is the base year of the new IIP series?
- 2022-23.
- Which price index replaced the WPI as the deflator in the new IIP series?
- The Output Producer Price Index (Output PPI).
- IIP growth in August 2026?
- 8% year-on-year.
- Which sector contracted in August 2026, and by how much?
- Mining and quarrying, by 5.6%.
- Which use-based category grew fastest in August 2026?
- Capital goods, at 16.9%.
- Which use-based category grew slowest in August 2026?
- Consumer non-durables, at 2.1%.
- How many of 23 manufacturing industry groups grew in August 2026?
- 18.
Prelims practice question
With reference to the Index of Industrial Production (IIP) data for August 2026, which one of the following use-based categories recorded the lowest growth?
- Primary goods
- Consumer non-durables
- Infrastructure and construction goods
- Consumer durables
Show answer
Answer: (b) Consumer non-durables. Consumer non-durables grew only 2.1%. Primary goods grew 3.5%, infrastructure and construction goods 6.4% and consumer durables 11.1%.
Use this in UPSC Mains: previous-year questions
Recurring theme: Industrial growth, its measurement and the balance between investment and consumption
- How to use this
Use the latest IIP data to show that industry is currently growing strongly, led by investment goods, while flagging base effects and weak mass consumption as limits.
- IIP grew 8% in August 2026 (manufacturing 9%, capital goods 16.9%, electrical equipment 30.9%); April to August growth was 6.7% against 4.2% a year earlier.
- Caution: August 2025 output was held down by inventory adjustments before the GST rate cuts of 22 September 2025, flattering the year-on-year figure; mining contracted 5.6%.
- Consumer non-durables grew only 2.1%; economist Madan Sabnavis links this to higher prices and low purchasing power, so sustained industrial growth needs broad-based demand.
- How to use this
Use it to show manufacturing gaining momentum while consumer non-durables, part of the consumer goods segment where MSMEs dominate, lag, and to set out policy levers for broader growth.
- Manufacturing grew 9% in August 2026, with 18 of 23 industry groups expanding; capital goods rose 16.9% and intermediate goods 13.7%.
- Consumer non-durables, where MSMEs dominate, grew only 2.1%, pointing to weak mass consumption.
- Policy levers: MSME credit and faster payments, employment-intensive sectors such as textiles, food processing and footwear, and PLI with infrastructure spending to sustain capital goods momentum.
Mains practice question
Industrial output growth in India has picked up, but consumption-linked segments continue to lag. Analyse the reasons and suggest measures for broad-based industrial growth. (250 words)
Model answer
The IIP grew 8% in August 2026, with manufacturing at 9% and capital goods at 16.9%, but consumer non-durables grew only 2.1%.
Signs of strength
- Capital goods (16.9%) and intermediate goods (13.7%) point to investment and supply-chain activity.
- 18 of 23 manufacturing groups grew; electrical equipment rose 30.9%.
- April to August growth of 6.7% against 4.2% a year earlier.
Why consumption-linked output lags
- Base effect: August 2025 was depressed by inventory adjustments before the September 2025 GST rate cuts, so headline growth is flattered.
- Weak purchasing power and higher prices, as economists such as Madan Sabnavis note, hold back FMCG demand.
- Mining contracted 5.6%, after a 0.9% fall in July.
Measures for broad-based growth
- Support incomes: employment-intensive sectors such as textiles, food processing and footwear.
- MSME credit and faster payments, since MSMEs dominate consumer goods.
- Keep inflation low so real incomes rise; pass GST cuts through to prices.
- PLI and infrastructure spending to sustain capital goods momentum.
- Better data: the new 2022-23 base and Output PPI deflator make the IIP more representative.
Conclusion
Investment-led recovery is visible; making it durable needs mass consumption to catch up.
The basics
Why this matters
GDP is released every quarter, but the Index of Industrial Production comes out every month. It is one of the quickest readings of how factories, mines and power plants are doing. UPSC asks about who compiles it, how it is classified and how to read it.
What the index measures
The IIP tracks the volume of production, not its value in rupees. Output is compared with a base year, now 2022-23 after the IIP base year revision and the Output PPI.
- 1ManufacturingThe heaviest component; grew 9% in August 2026
- 2Mining and quarryingContracted 5.6% in August 2026
- 3Electricity and gas supplyGrew 12.3%
- 4Water supply, sewerage and waste managementGrew 6.3%
Reading it by end use
The same output is also sorted by what it is used for. This Use-based classification tells you whether growth is coming from investment or from consumers.
Why a big number can mislead
Year-on-year growth compares this August with last August. If last August was unusually weak, this year looks strong even without real improvement. This is the Base effect. In August 2025, firms cut inventories ahead of the GST rate cuts of 22 September 2025.
The revision habit
The first estimate is not final. July's growth was first put at 6.7% and then revised to 7.4% as more factories reported.
The takeaway
Look past the headline. Ask which sectors and which end uses drove growth, how much is base effect, and whether the number will be revised.
Go deeper
In one line: Industrial output grew 8% in August 2026, led by manufacturing, power and capital goods, but consumer non-durables grew only 2.1% and mining shrank.
Why it matters for UPSC
IIP data is a standard Prelims topic (compiler, base year, classifications) and a Mains example for industrial growth, investment and consumption demand.
The core idea
The Index of Industrial Production compares this month's output volume with the same month last year. The new series follows the IIP base year revision and the Output PPI. Reading it by Use-based classification shows investment goods booming and everyday consumer goods lagging. Part of the headline is a Base effect, because August 2025 was weak.
Numbers and dates to remember
- 28 September 2026: August data released by the NSO.
- 8%: IIP growth in August 2026; July revised to 7.4% from 6.7%.
- Manufacturing 9%, electricity and gas 12.3%, water supply and waste 6.3%, mining minus 5.6%.
- Capital goods 16.9%, consumer non-durables 2.1%.
- 6.7%: April to August 2026 growth, against 4.2% a year earlier.
- 2022-23: base year of the new series.
Where to go next
- Index of Industrial Production: what it measures and who compiles it.
- IIP base year revision and the Output PPI: what changed in the new series.
- Use-based classification: reading growth by end use.
- Base effect: why year-on-year numbers can mislead.
Go deeper: investment-led or consumption-led recovery?
The optimistic reading. Capital goods at 16.9% and intermediate goods at 13.7% suggest firms are adding capacity and supply chains are busy. Electrical equipment rose 30.9%. Manufacturing at 9% is, per Business Standard, its second-highest reading in 29 months. Cumulative growth of 6.7% for April to August is well above last year's 4.2%. Read through the Use-based classification, this looks like an investment cycle.
The cautious reading. The Base effect inflates August because firms had cut output ahead of the September 2025 GST rate cuts. Consumer non-durables at 2.1% signal weak mass consumption; Bank of Baroda's Madan Sabnavis links this to higher prices and low purchasing power. Mining contracted 5.6%, after a 0.9% fall in July.
The data question. The new IIP base year revision and the Output PPI updates the product basket and weights and replaces the WPI with the Output Producer Price Index as the deflator for items reported in value terms. This makes the Index of Industrial Production more representative, but comparisons with the old 2011-12 series need care. For Mains, argue that sustained growth needs both investment and a broad rise in household demand.
Index of Industrial Production
What the monthly index measures and who compiles it.
In one line: The IIP is a monthly index of the volume of industrial production in India, compiled and released by the National Statistics Office (NSO) of MoSPI.
How it works
The IIP compares output in a month with output in the base year, set at 100. Growth is usually reported year-on-year, against the same month of the previous year, to remove seasonal effects such as the monsoon. The index is presented by sector (mining, manufacturing, electricity, and in the new series water supply and waste management) and by use-based category. Manufacturing carries the heaviest weight; in the old 2011-12 series its weight was 77.63%.
Related index
The Index of Eight Core Industries (coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity) is compiled by the Office of the Economic Adviser in DPIIT and is watched as an early signal for the IIP.
Why it is in the news
August 2026 showed 8% growth, and July was revised up to 7.4%. First estimates are revised as more factories report.
Where to go next
IIP base year revision and the Output PPI
What changed when the index moved to 2022-23.
In one line: In 2026 the IIP moved from base year 2011-12 to 2022-23, with an updated product basket, revised weights, broader coverage and a new deflator.
Why base years change
An economy's structure shifts over time. New products appear and old ones fade. A base year that is too old gives too much weight to declining industries. That is why MoSPI revises the base year periodically.
What changed
The first release under the 2022-23 base covered April 2026, when growth was 4.9%. The new series replaced the Wholesale Price Index with the Output Producer Price Index as the deflator for products whose output is reported in value terms. MoSPI said the Output PPI is more granular, matches international practice, and prepares the ground for PPI-based volume estimates in the national accounts.
Why it is in the news
August 2026 data is from this new series, so it is not directly comparable with older reports on the 2011-12 base.
Where to go next
Use-based classification
Reading growth by what the goods are used for.
In one line: The use-based classification groups IIP output into six categories by end use, showing whether growth comes from investment, supply chains or consumers.
The six categories
- Primary goods: basic items such as minerals, fuels and electricity.
- Capital goods: machinery and equipment used to make other goods.
- Intermediate goods: inputs such as yarn, chemicals and components.
- Infrastructure and construction goods: cement, steel and similar items.
- Consumer durables: goods that last, such as appliances and vehicles.
- Consumer non-durables: goods used up quickly, such as food products, soaps and medicines.
Why it is in the news
In August 2026 capital goods grew 16.9% and intermediate goods 13.7%, but consumer non-durables only 2.1%. Strong capital goods suggest investment; weak non-durables suggest everyday consumption is soft. Economists read the two together to judge whether growth is broad-based.
Where to go next
Base effect
Why a large year-on-year number can overstate real change.
In one line: A base effect is the distortion in a growth rate caused by an unusually high or low value in the comparison period.
How it works
Growth rate = (this period minus base period) divided by base period. If the base period was unusually low, even ordinary output looks like fast growth. If it was unusually high, growth looks weak. The same logic applies to inflation: a spike in prices last year makes this year's inflation look low.
Why it is in the news
The Indian Express notes that August 2025 output was held down by inventory adjustments before the GST rate cuts of 22 September 2025, when firms expected lower tax rates and reduced stocks. August 2026 is compared with that weak month, which flatters the 8% figure. Month-on-month data, and growth over several months (6.7% for April to August), help check for this effect.
Where to go next
Prelims-style quiz
Consider the following statements about the new IIP series:
1. Its base year is 2022-23.
2. It uses the Output Producer Price Index as the deflator instead of the Wholesale Price Index.
3. It is compiled by the Reserve Bank of India.
How many of the statements given above are correct?- Only one
- Only two
- All three
- None
Show answer
Answer: (b) Only two. Statements 1 and 2 are correct. Statement 3 is wrong: the IIP is compiled by the National Statistics Office under MoSPI.
Consider the following statements about IIP data for August 2026:
1. Manufacturing grew faster than the overall index.
2. Electricity and gas supply grew faster than manufacturing.
3. Mining and quarrying contracted.
4. July 2026 growth was revised downwards.
How many of the statements given above are correct?- Only one
- Only two
- Only three
- All four
Show answer
Answer: (c) Only three. Statements 1 (9% against 8%), 2 (12.3% against 9%) and 3 (minus 5.6%) are correct. Statement 4 is wrong: July was revised upwards, from 6.7% to 7.4%.
Consider the following statements:
Statement-I: Year-on-year IIP growth for August 2026 overstates the underlying improvement in industrial activity.
Statement-II: Output in August 2025 was held down by inventory adjustments ahead of the GST rate cuts of September 2025.
Which one of the following is correct in respect of the above statements?- Both Statement-I and Statement-II are correct and Statement-II explains Statement-I
- Both Statement-I and Statement-II are correct and Statement-II does not explain Statement-I
- Statement-I is correct but Statement-II is incorrect
- Statement-I is incorrect but Statement-II is correct
Show answer
Answer: (a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I. A weak base month (August 2025) makes the year-on-year growth in August 2026 look larger. That is the base effect, so Statement-II explains Statement-I.
In the use-based classification of the IIP, packaged food, soaps and medicines fall mainly under which category?
- Intermediate goods
- Consumer durables
- Consumer non-durables
- Primary goods
Show answer
Answer: (c) Consumer non-durables. These are fast-moving goods used up quickly, so they fall under consumer non-durables, the category that grew only 2.1% in August 2026.
Consider the following statements:
1. The IIP measures the change in the volume of industrial production.
2. The Index of Eight Core Industries is compiled by the Office of the Economic Adviser, DPIIT.
Which of the statements given above is/are correct?- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show answer
Answer: (c) Both 1 and 2. Both are correct. The IIP is a volume index. The core industries index, covering coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, is compiled by the Office of the Economic Adviser in the Department for Promotion of Industry and Internal Trade.