Industrial output up 8% in August, but everyday consumer goods grew just 2.1%

The brief in 6 cards

1. Context1 / 6

   Once a month, the government publishes a number. It says how much more, or less, India’s factories, mines and power plants produced than in the same month a year earlier. That number is the Index of Industrial Production (IIP). For August 2026 it was 8.0 per cent.

   By any recent standard, that is a good figure. But one number like this is a summary, and summaries hide things.

   Think of a shop that reports sales up eight per cent. The owner is pleased. Then the owner reads the itemised list. The rise came almost entirely from air-conditioners and machines sold to two large buyers. Soap, biscuits, hair oil and detergent barely moved. These are the things everyone buys every week.

   The eight per cent is real. But the owner has learnt something important. The growth rests on a few buyers, not on the neighbourhood. If those buyers pause, the eight per cent goes away.

   The August IIP looks a lot like this.

   The fastest-growing groups were:

   • Capital goods: machines and equipment that businesses buy to make other things. They grew 16.9 per cent.
   • Intermediate goods: half-finished inputs that go into more manufacturing. They grew 13.7 per cent.
   • Consumer durables: things like refrigerators, vehicles and televisions. They grew 11.1 per cent.

   The group that barely moved was consumer non-durables. These are food products, toiletries, cleaning materials and everyday clothing. They grew only 2.1 per cent.

   Economists watch that last group to see how ordinary households are doing. It is the one that did not grow. In short, industrial output is up, but the everyday goods that households buy are lagging.

   There is a second thing to keep in mind. A year-on-year growth rate compares this August with last August. If last August was weak, this August looks strong even when little has changed. This is called the base effect. Always check for it before believing a growth rate.

2. Key highlights2 / 6

   All figures are from the Quick Estimates for August 2026, released on 28 September 2026 by the Ministry of Statistics and Programme Implementation (MoSPI). The base year is 2022-23 = 100. These are quick estimates and will be revised.

   • Headline. IIP grew 8.0 per cent year-on-year in August 2026. The index stood at 123.3, against 114.2 in August 2025. A year earlier, in August 2025, IIP growth was 4 per cent.
   • By sector.
     • Manufacturing grew 9.0 per cent.
     • Electricity and gas supply grew 12.3 per cent.
     • MoSPI noted that manufacturing has grown 8 per cent or more for three months in a row.
   • By use (growth in August 2026 over August 2025, with index level):
     • Capital goods: 16.9 per cent (140.7)
     • Intermediate goods: 13.7 per cent (131.8)
     • Consumer durables: 11.1 per cent (129.4)
     • Infrastructure and construction goods: 6.4 per cent (132.5)
     • Primary goods: 3.5 per cent (111.8)
     • Consumer non-durables: 2.1 per cent (114.3)
   • Top three contributors to overall growth. Intermediate goods, capital goods and consumer durables.
   • Leading manufacturing groups. Electrical equipment grew 30.9 per cent and motor vehicles 25.2 per cent. In electrical equipment, MoSPI named switchgear and circuit-protection apparatus, optical fibre and cable connectors, UPS units and solid-state drives. In other transport equipment, it named two-wheelers, railway rolling stock and parts, and motorcycle and moped components.
   • Shrinking groups. Wearing apparel fell 7.4 per cent and tobacco products fell 8 per cent.
   • Cumulative. Growth for April–August 2026 was 6.7 per cent, against 4.2 per cent in April–August 2025.
   • Revision. The July 2026 index was finally revised in this release. Every monthly figure goes through three stages: provisional, first revision and final revision.
3. Key concepts3 / 6

   1. Index of Industrial Production

   The IIP measures the volume of production in industry, not its value. This is the most important thing to understand about it.

   Suppose a factory made 100 shirts last year and 108 this year. The index shows eight per cent growth, whether the shirts sold for ₹500 or ₹700. Prices are taken out. That is why the IIP is called a volume index, and why inflation does not affect it.

   Think of a school that records how many students came, not how much fee it collected. The two are related, but they answer different questions.

   The National Statistical Office prepares the IIP under the Ministry of Statistics and Programme Implementation. It is released on the 28th of every month (or the next working day). It covers the month two months earlier, so August data comes out at the end of September. The data comes from source agencies, which get it from factories and other producing units.

   The current base year is 2022-23 = 100. So an index of 123.3 means industrial output in August 2026 was 23.3 per cent above the average monthly level of 2022-23. Base years are changed from time to time so that the list of items matches what the economy really makes. An index weighted for the industry of the 1980s would measure a country that no longer exists.

   2. Two ways of sorting the same data

   The IIP is shown in two different cuts. Mixing them up is a common mistake.

   • Sectoral classification asks who produced it. The groups are mining, manufacturing, and electricity (in the current series, electricity and gas supply). Manufacturing has by far the largest weight.
   • Use-based classification asks what it is for. The groups are primary goods, capital goods, intermediate goods, infrastructure and construction goods, consumer durables and consumer non-durables.

   These are not two datasets. They are the same output sorted twice, like a library that can arrange its books by author or by subject.

   The use-based cut is the more interesting one. It tells you the kind of growth, not only its size.

   3. The six use-based groups

   • Primary goods start the chain: coal, crude petroleum, natural gas, ores, electricity and basic fuels.
   • Intermediate goods are partly processed items that go into more manufacturing, like yarn, chemicals, steel sheets and components. They feed later production, so growth here often comes before growth in finished goods. They are a leading indicator.
   • Capital goods are machines and equipment that businesses buy to make other things, like turbines, machine tools and industrial equipment. When their output rises, firms are investing, because they expect demand later. This is the most forward-looking series in the index.
   • Infrastructure and construction goods are cement, steel bars and construction equipment. They depend mostly on government capital spending and on real estate.
   • Consumer durables are finished goods that households buy now and then and use for years, like refrigerators, two-wheelers, televisions and air-conditioners. The purchase can often be put off, and it is often paid for with credit.
   • Consumer non-durables are what households buy again and again and use up quickly, like food products, soap, detergent, hair oil, packaged drinks and everyday clothing. This is the group usually called FMCG.

   Here is the difference in one picture. A refrigerator is a durable. A family can wait another year for it. The detergent used to wash clothes this week is a non-durable, and buying it is hardly a choice. That is why the non-durables series tells you so much. When it stalls, it says something about household budgets at the level where nothing can be put off.

   4. The base effect

   A year-on-year growth rate compares two months. So it depends on both of them.

   Suppose last August was unusually weak, because of heavy rain, a festival in a different month, a disruption or a shutdown. Then this August’s growth rate will look high even if production is quite ordinary. This is a favourable (or low) base effect.

   The reverse is also true. If last August was very strong, this August’s growth will look poor even if output is healthy. That is an adverse base effect.

   Here is the everyday version. A student who scored 40 last term and 60 this term has improved by fifty per cent. A student who scored 85 and then 90 has improved by six per cent. The second student is doing better. The growth rate is not the achievement.

   There are two ways to see past a base effect. First, look at the index level itself (123.3 against 114.2), not only the percentage. Second, compare across several months. That is why the April–August figure of 6.7 per cent matters more than the single month’s 8.0 per cent.

   Also watch the timing of festivals. Production for the festive season is brought forward. So if Diwali falls in October and not November, output shifts between months without changing the year’s total. Read monthly Indian data with the festival calendar in hand.

   5. Quick estimates and revision

   The figure released on the 28th is a quick estimate. It is based on the returns that arrived by the cut-off date. Not every producing unit reports on time. As more data comes in, the figure is revised, usually once, and then made final.

   Revisions are often large. So here is a rule for an aspirant: never build an argument on one month’s provisional figure. Use it as an example. Use the cumulative figure and the trend as proof.

   6. Reading IIP along with other indicators

   No single indicator describes an economy. Read the IIP together with these:

   • Eight Core Industries index. It covers coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. These carry a weight of about 40 per cent in the IIP. Core-sector data comes out earlier, so it gives an early signal.
   • GST collections. A rough measure of the value of transactions across the economy.
   • Capacity utilisation, from the RBI’s OBICUS survey. If firms already run close to full capacity, new investment is more likely.
   • PMI (Purchasing Managers’ Index). A survey-based, forward-looking indicator that comes out faster than IIP.
   • Rural wage data and MGNREGA demand. Signs of rural household income and distress.
   • Employment data, from the Periodic Labour Force Survey.

   Here is the rule. Production data tells you what was made. Other data tells you whether anyone bought it.

4. Note4 / 6

   What the mix of growth suggests

   This part is interpretation. The figures are official, but the readings below are disputed, and more than one is given.

   The investment signal is real. Capital goods at 16.9 per cent and intermediate goods at 13.7 per cent are strong. If they hold for months and not just one reading, they show that firms are buying machinery and that inputs are moving through the production chain. Electrical equipment at 30.9 per cent fits with investment in power transmission, data infrastructure and electronics. MoSPI named switchgear, optical fibre, UPS units and solid-state drives, and these point the same way. This kind of growth builds future capacity. It does not merely meet today’s demand.

   The durables number is unclear. Consumer durables at 11.1 per cent can mean households are buying more. It can also mean makers are building stock before the festive season, rebuilding inventory, or filling export orders. The IIP measures what left the factory, not what left the shop. Whether the goods really sold to households shows up later, in retail and financing data.

   The non-durables number is the one that holds back optimism. At 2.1 per cent, it says the goods households cannot put off grew barely faster than the population. Several explanations are given. They do not rule each other out.

   • Real wages, especially in rural areas, have not grown enough to lift everyday buying.
   • Food and other essentials have got dearer, and this has eaten up the income gains that did occur.
   • Some buying has moved from packaged goods, which the IIP counts, to unpackaged local goods, which it does not.
   • The base for non-durables last August may itself have been distorted.

   The falls in wearing apparel (7.4 per cent) and tobacco (8 per cent) point in different directions. Do not read them together. Apparel is a mass-consumption good with an export side, and its fall fits the weak non-durables. Tobacco is shaped by tax and rules of its own. Drawing a conclusion about demand from it would be a mistake.

   The K-shaped question. In this pattern, investment and durables are strong while everyday consumption is weak. Commentators call this a K-shaped recovery, where different parts of the economy recover along different paths instead of together. Whether this fits India’s data is disputed. Those who accept it point to exactly this mix. Those who reject it make three points. One month’s non-durables figure swings a lot. The IIP’s non-durables basket is a poor stand-in for total household consumption, because it leaves out services entirely. And consumption should be read from the National Accounts, not from a volume index of factory output.

   Both cautions apply together. The IIP covers industry only. Services are roughly half of India’s gross value added, and they are not in this index at all. A conclusion about household consumption drawn from the IIP alone comes from only part of the picture.

   These are competing readings of official data. They are set out side by side and not decided between.

5. Way forward5 / 6
   • Sustaining the investment cycle. Capital goods growth comes from decisions taken earlier. Whether it goes on depends on firms seeing demand ahead. Public capital spending has been a large part of this cycle. The test is whether private investment takes the lead. That needs capacity use to rise further, and credit to reach medium-sized firms, not only large ones.
   • The consumption gap. The main limit on non-durables is the buying power of households at the lower end. The cure lies in real wage growth, rural incomes and the prices of essentials, not in industrial policy. The tools are farm incomes, rural jobs and inflation control. They sit outside the industry ministry altogether.
   • MSME credit. Smaller firms make a large share of non-durables and apparel. A recovery centred on capital goods from big firms will not reach them by the same route. Working capital, late payments and the cost of formal credit are still the limits.
   • Logistics. The cost of moving goods is still a lasting drag on the competitiveness of Indian manufacturing. It hurts most in low-margin, high-volume goods. Those are exactly the non-durables that are lagging.
   • Apparel and textiles. A 7.4 per cent fall in a sector that employs many people needs separate attention from the overall figure. Jobs do not rise and fall with a sector’s weight in the index.
   • Reading the data. The best habit, for an analyst or an administrator, is to refuse to treat one month’s headline as a finding. Read IIP with core-sector output, GST collections, capacity use and employment data. Read the cumulative figure next to the monthly one. And check the base before believing a growth rate.

   The main point is this. An economy can grow at the top of the production chain while staying flat at the bottom of the consumption chain. For a while, both can be true. But this cannot go on for ever. The machines being installed today are installed in the hope that somebody will eventually buy what they make. The 16.9 per cent and the 2.1 per cent are, in the end, a bet that the second number will rise to meet the first.

6. Note6 / 6

   

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