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Brokerages have described India's stronger-than-expected industrial production growth of 7.3 per cent in June as a sign of resilient manufacturing and investment activity, while cautioning that the pace of expansion could moderate in the coming months as temporary tailwinds fade and weather- and global-related risks persist.
Crisil said the acceleration in industrial output was driven by stronger manufacturing activity, particularly capital goods and consumer-oriented sectors, while electricity generation remained a key contributor due to higher power demand during warmer-than-normal weather. It, however, said slowing global growth, elevated input costs and uncertainties related to the West Asia conflict could temper industrial output going forward. "An erratic and sub-normal monsoon could further weigh on growth by curbing agricultural incomes and raise the cost of farm-based industrial inputs.," the report further added. Nuvama Research also termed the June print a broad-based recovery supported by favourable base effects, but said sustaining the momentum could be challenging. "Overall, while supply-side risks remain elevated, demand-side risks are increasingly emerging, particularly around potential El Nino conditions and the waning impact of GST rate cuts," the report said, adding that adverse base effects in the second half of FY27 could weigh on growth momentum. ICICI Bank Global Markets said industrial activity continues to be supported by manufacturing, capital goods and infrastructure spending, with domestic and external demand showing signs of improvement. "The key risk to manufacturing sector are geo -political developments driving oil prices higher and limiting exports to GCC countries because of blockade of Strait of Hormuz and weak rural demand as a result of El-Nino impacting agriculture output," the report said. Dolat Capital said the June data pointed to the strongest industrial expansion in two years, supported by broad-based manufacturing gains and sustained investment activity. "Looking ahead, with monsoon conditions normalizing in Jul-26 and heatwaves easing, electricity demand is likely to moderate, resulting in a natural softening of headline YoY industrial production growth. However, the underlying trend remains constructive, supported by resilient investment activity," it said. Overall, the brokerages agreed that investment-led manufacturing remains the key driver of industrial activity, although the sustainability of the momentum will depend on domestic demand, weather conditions, global growth and geopolitical developments in the coming months. (ANI)
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