Daijiworld Media Network - New Delhi

New Delhi, Aug 28: India’s industrial output rebounded sharply in July, rising to 3.5 per cent from 1.5 per cent in June, signaling renewed momentum in the economy despite external headwinds. The surge, led by strong performance in manufacturing and infrastructure-linked sectors, has been viewed by economists as a positive sign of underlying demand resilience.

According to Aditi Nayar, Chief Economist at ICRA Limited, the July data marks a broad-based recovery across sectors, with manufacturing output registering a six-month high growth of 5.4 per cent. This was largely driven by increased demand for construction-related inputs and a pick-up in consumer durable goods production. Infrastructure and construction goods output jumped 11.9 per cent — the highest in nearly two years — on the back of robust cement and steel activity.

Consumer durables output also recorded a 7.7 per cent uptick, attributed to pre-festive inventory build-up and an increase in GST e-way bill generation. Capital goods production saw solid growth of 8.6 per cent during the April-July period, boosted by machinery exports and ongoing public sector capital expenditure.

However, Nayar cautioned that global trade volatility and tariff-related uncertainties could continue to dampen private investment sentiment. She also noted that heavy monsoon rainfall in August might slightly suppress the IIP growth rate for the current month, possibly bringing it below the 3 per cent mark. Still, anticipated monetary easing and tax reforms could provide support to urban consumption.

Dipti Deshpande, principal economist at Crisil Limited, termed July’s industrial performance as an “anticipatory surge,” fuelled by both government infrastructure projects and pre-emptive export activity ahead of impending US tariff hikes. She noted strong contributions from major export-oriented sectors like metals, machinery, pharmaceuticals, auto components, and electronics, which lifted overall manufacturing output.

While the consumer durables segment saw robust growth, Deshpande pointed out that the non-durables segment lagged due to a tepid performance in food-related industries. She warned that India’s exports could be hit in the coming months due to steep US tariff hikes — the most significant faced by any of India’s peer economies — affecting vulnerable sectors such as textiles, chemicals, and gems and jewellery.

Micro, Small and Medium Enterprises (MSMEs), which contribute nearly 45 per cent to India’s exports, are expected to bear the brunt of these external shocks. Nevertheless, Deshpande believes that strong rural demand could provide a partial buffer against any export slowdown, especially in the upcoming festive quarter.

With industrial output on the rise and domestic demand showing promise, analysts expect the growth trajectory to remain cautiously optimistic in the months ahead — barring any sharp global disruptions.