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India's industrial production growth is expected to remain cautious for the full year as complete normalisation of supply chains could take several months despite easing geopolitical tensions in West Asia, according to a report by Bank of Baroda.
The report said industrial production registered a growth of 5.1 per cent in May 2026, higher than the 3.4 per cent growth recorded in May 2025. It stated, "Complete normalisation of supply chains will take months, hence we maintain cautious view on our full year IIP growth forecast". According to the report, the improvement in industrial output was primarily driven by stronger performance in the manufacturing sector and electricity generation. However, mining growth declined, while water supply, sewage and electricity output recorded some deceleration. The report noted that manufacturing growth stood at 5.5 per cent in May 2026, supported by sectors such as textiles, basic metals, fabricated metals and motor vehicles. Bank of Baroda said the latest industrial production data is based on the revised base year, which has been changed from 2011-12 to 2022-23. The report also highlighted that the production of consumer durables continued to improve. It attributed the rise to the ongoing heatwave and uneven distribution of the monsoon, which have kept demand elevated. Looking ahead, the report expects industrial production to gain some momentum in the coming months as geopolitical tensions in West Asia have eased considerably. According to the report, the reopening of the Strait of Hormuz and the decline in oil prices are expected to gradually lower input costs for industries. Supply-side pressures are also likely to improve as trade routes become more accessible. However, Bank of Baroda cautioned that the process of restoring normal supply chains will take time. "With the re-opening of the Strait of Hormuz and decline in oil prices, the cost of inputs is expected to come down gradually and supply pressures are also expected to improve. However, it is estimated that it will still take couple of months before all the backlogs can be cleared and supply chains are fully normalised. We thus maintain cautious view on our full year growth forecast," the report said. The report added that uneven monsoon distribution and the impact of El Nino are expected to continue supporting production of consumer durables and electricity generation in the near term, unless the spread of the monsoon gathers pace. (ANI)
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