Temporary respite: On the June 2026 data for the Index of Industrial Production

The June 2026 data for the Index of Industrial Production has come as a pleasant surprise. The 23-month high growth rate of 7.3% of the overall index was unexpected given the significant economic headwinds from the West Asia crisis and a deficient monsoon. Some of the growth was due to a low base, since the performance last June was the worst in nearly a year, but the numbers nevertheless indicate resilience. The manufacturing sector accelerated due to a dual push from the domestic and the external sectors. Consumer durables growth remained above 7% for the second consecutive month, and the non-durables sector saw growth quicken to a six-month high. At the same time, data from the Commerce Ministry showed that merchandise exports grew 15.5% in June, revealing demand from abroad. The capital goods sector also saw double-digit growth. The sector has grown in double digits in eight out of the last 10 months. This bodes well for the economy, but also reveals some risks. Capital creation, primarily by the government, has been the single consistent engine of growth in the post-pandemic years. It needs to keep firing. There are too many uncertainties and headwinds for other engines such as exports and domestic consumption to consistently take up the load. Other areas of growth are also far too seasonal. The electricity sector grew at a 25-month high in June, largely in response to a heat wave in several parts of the country. The mining sector, too, snapped a four-month streak of contraction and grew in June. Yet, this will likely be temporary since the progressing monsoon will disrupt mining activities.