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* Industrial production accelerated to 7.3% YoY in Jun'26 from 5% in May'26, the fastest pace in almost two years (23 months). The growth was broad-based, led by electricity generation and manufacturing. Mining returned to positive territory after five months of degrowth.

* Manufacturing, accounting for over 76% of the IIP basket, grew 7.8% YoY in Jun'26, with 19 out of 23 industry groups recording positive growth. The expansion was led by electrical equipment (+34.0%), motor vehicles (+17.5%), and food products (+10.8%). Switchgear, UPS, and end-face connectors for optical fibers and cables drove the growth within electrical equipment. Auto ancillaries, passenger cars, and commercial vehicles drove growth in motor vehicles.

* Electricity & Gas Supply remained the fastest-growing major sector, expanding 10.6% YoY in Jun'26. The composition of this growth shifted notably from May. Non-renewable generation (+13.0%) outpaced renewables (+7.3%) this month, a reversal that likely reflects both a higher renewable base and sustained thermal power generation to meet cooling demand through an extended hot summer.

* Mining, the weak link through most of FY26, turned positive at +1.0% YoY in Jun'26. It is the first expansion after five months of degrowth. The move was driven almost entirely by a 38.9% surge in metallic minerals, which more than offset continued contraction in fuel minerals (-1.5%) and a sharp 13.4% decline in non-metallic minerals.

* The use-based classification continued to indicate healthy investment activity. Capital goods production rose 14.2% YoY, moderating marginally from 15.5% in May but holding comfortably in double digits for a second straight month. Infrastructure & construction goods accelerated to 7.5% YoY from 6.6% in May.

* Consumption indicators remained supportive. Consumer non-durables growth swung to 4.9% YoY in Jun'26 from -0.4% in May, a sharp reversal that eases some concerns around rural demand. Consumer durables growth held steady at 7.7%, a modest step down from 8.0% in May but still firmly urban-led.

* Outlook: Domestically, monsoon distribution remains uneven, with persistent El Niño-linked risks to kharif output. The cumulative rainfall deficit stood at 16% below LPA (as of 27 July), and Kharif sowing stands at 4.7% YoY. Electricity generation should stay supported by cooling demand, but the June bounce in consumer non-durables will need confirmation before it changes the read on rural purchasing power. The underlying agricultural income risk remains.

* Globally, the bounce back in oil prices could prove negative to the strong manufacturing sector working through higher input costs, inflated inventory prices, and shipping backlogs. A durable reopening of the Strait of Hormuz cannot still be assumed as a base case.

Industrial production hits a 23-month high

India's industrial production increased sharply to 7.3% YoY in Jun'26 from 5.1% in May, its fastest pace in 23 months. The growth was broad-based. Manufacturing, electricity, and, for the first time in months, mining all contributed positively to the headline growth.

Manufacturing continues to drive industrial growth

* Manufacturing, which carries over three-fourths of the weight in the IIP basket, expanded 7.8% YoY in Jun'26, up from 5.5% in May and remaining the primary contributor to headline growth. Of the 23 manufacturing industries, 19 registered growth, up from 16 in May, a genuine broadening of the expansion.

* The strongest contributors were electrical equipment, motor vehicles, and food products. Electrical equipment surged 34.0%, more than doubling its May pace, led by switchgear/circuit-breaker components, UPS and solid-state drives, and optical-fiber connectors. Motor vehicles grew 17.5%, driven by auto components, passenger cars, and commercial vehicles. Food products grew 10.8%, led by tea, non-basmati rice, and starch.

* Other sectors posting healthy growth included textiles (+13.7%), other nonmetallic mineral products (+12.9%), computer, electronic & optical products (+12.6%), other transport equipment (+11.9%), other manufacturing (+11.7%), beverages (+12.5%), and furniture (+11.1%).

* Weakness was confined to a narrower band, including sectors like wood products (-7.4%), wearing apparel (-6.9%), coke & refined petroleum products (- 0.5%), and chemicals (-0.3%), which remained in contraction, while pharmaceuticals barely held positive at +0.8%.

Investment cycle remains healthy

* The use-based classification continues to signal a healthy investment cycle. Capital goods output grew 14.2% YoY in Jun'26, moderating slightly from May's 15.5% but holding comfortably in double digits for a second consecutive month. It is still an encouraging read on machinery and equipment demand.

* Infrastructure & construction goods production grew 7.5% YoY in Jun'26, actually a step up from 6.6% in May and the first sequential pickup in this segment since the normalization that set in after the exceptionally strong Nov'25-Feb'26 run. One month doesn't confirm strong growth in the sector, but it's worth tracking whether this holds into July.

Outlook:

* Domestically, monsoon distribution remains uneven, with persistent El Niñolinked risks to kharif output. The cumulative rainfall deficit stood at 16% below LPA (as of 27 July), and Kharif sowing stands at 4.7% YoY. Electricity generation should stay supported by cooling demand, but the June bounce in consumer non-durables will need confirmation before it changes the read on rural purchasing power. The underlying agricultural income risk remains.

* Globally, the bounce back in oil prices could prove negative to the strong manufacturing sector working through higher input costs, inflated inventory prices, and shipping backlogs. A durable reopening of the Strait of Hormuz cannot still be assumed as a base case

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