“Key sectors such as textiles, chemicals, electronics, leather products and wood products reported a decline in output on-year, while refining, food products, paper products, non-metallic mineral products, basic metals and electrical equipment saw slower output growth on-year. Sectors like automobiles and machinery and equipment continued to register an improvement,” Dipti Deshpande, Principal Economist, Crisil Ltd., said.
The March data captured only a part of the shock as uncertainty and weak producer sentiment had yet to fully manifest in production data. The deeper impact was expected to show up down the road, particularly in the first quarter of this fiscal, she added.
Domestic manufacturing has begun to bear the brunt of costlier and tighter supplies of petroleum products and natural gas. Manufacturing IIP slowed to 4.3 per cent growth from 5.9 per cent. The Purchasing Managers’ Index also slipped in March from February but remained in the expansion zone, indicating the likely uneven impact of the conflict across sectors and time based on their ability to absorb the shock. “The impact on a sector’s output will occur when an input becomes more expensive or less available,” Deshpande said.
While the government is gradually restoring supply of energy and other critical inputs to industry, the prolonged conflict has kept commodity prices elevated. “We have lowered our GDP growth forecast for fiscal 2027 to 6.8 per cent from 7.1 per cent. The revision reflects the impact of two full months of the West Asia conflict with damage to energy infrastructure, the impact of which will linger amid gas supply shortages and higher input and shipping costs,” she noted.
Although some manufacturers were expected to switch to alternative fuels to compensate for natural gas shortages, cost pressures would persist. Export disruptions would further weigh on the domestic industry, Deshpande said.
“Energy intensive sectors faced the brunt of high input costs. This was mainly on account of deceleration in electricity and marginal growth in manufacturing on YoY basis. Together, these sectors account for more than 85 per cent of IIP. On the other hand, mining, which accounts for a little over 14 per cent of IIP, provided upward support with its growth of 5.5 per cent. The deceleration in IIP could be gauged from the eight-core sector production (accounts for over 40 per cent of IIP) that contracted 0.4 per cent in March 2026, hitting a 19-month low,” Megha Arora, Director, India Ratings and Research, said.
Within the manufacturing sector, 14 out of 23 industry groups grew on YoY basis in the month. The upside to IIP growth was lent by high growth in motor vehicles, trailers and semi-trailers (18.1 per cent), followed by machinery and equipment (11.2 per cent) and basic metals (8.6 per cent), while downward pressure was exerted by textiles, chemicals and chemical products (fertilizer production declined 24.6 per cent in March 2026 due to gas shortage) and other manufacturing, she added.
India Ratings expects IIP growth in April 2026 to improve to around 5 per cent as base effect will help in maintaining the growth momentum (April 2025: 2.6 per cent). Government’s continued capex is likely to keep capital goods (FY26: 8.2 per cent) and infrastructure/construction goods (FY26: 9.8 per cent) growth momentum in FY27 as well.
For more details: https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=2256241®=3&lang=1
