India's industrial output showed a positive trend in July, with manufacturing output rebounding by 5.4%, up from 3.7% in June, signaling a significant recovery in the manufacturing sector.

Despite this monthly rebound, the overall Index of Industrial Production (IIP) for the first four months of the year grew only by 2.3%, which is lower than the 5.4% growth observed in the same period last year.

Electricity generation experienced a marginal increase of 0.6% after a decline in June, while mining activity improved slightly from an 8.7% fall to a 7.2% decrease year-on-year.

Experts highlight that public sector investment continues to drive growth in construction and capital goods sectors, although private investment remains subdued amid global economic headwinds.

Construction goods saw a remarkable growth of 11.9%, the highest in 21 months, supported by increased government capital expenditure, with infrastructure and construction sectors leading this surge.

Sector-wise analysis shows a divergence: urban demand remains subdued, especially in consumer durables, while rural demand stays steady, reflecting differing consumption patterns.

Primary goods continued to contract by 1.7%, contrasting with the positive growth seen in other segments of the industrial output.

Out of 23 industry sectors, 12 grew faster than the overall IIP, with some sectors like basic metals, electrical equipment, and transport equipment posting double-digit growth, indicating sector-specific strength.

Within manufacturing, 14 industry groups showed positive growth, notably in basic metals (12.7%), electrical equipment (15.9%), and non-metallic mineral products (9.5%).

Use-based indices reveal the highest growth in infrastructure and construction goods at 11.9%, followed by intermediate goods and consumer durables, reflecting robust infrastructure investment.

This level of industrial growth last peaked in March 2025 with a 3.9% increase, and the July growth rate of 5.4% surpasses the 5% expansion recorded in July 2024.

Analysts suggest that strong domestic demand, particularly from rural areas, may help offset external pressures such as US tariffs that could impact exports.