The index of industrial production rose to a four-month high of 3.5 percent in July, as compared to a 1.5 percent rise in June, data released by the government on August 28 showed.

The better-than-expected performance of the industrial sector tracks from manufacturing which rose to a six month high of 5.4 percent compared with 3.7 percent in the previous month.

Electricity sector returned back to growth 0.6 percent from -1.2 percent in June, whereas mining sector performance improved to 7.2 percent from 8.7 percent in the previous month but remained in contractionary territory.

"Mining was down by 7.2 percent with the monsoon as well as lower demand being two factors. Electricity generation too was low at 0.6 percent," said Madan Sabnavis, chief economist, Bank of Baroda.

The uptick in the larger industry is in contrast with the performance of the eight core industries, which together carry a 40 percent weight in the Index of Industrial Production (IIP). The core sector growth had eased to 2 percent in July from 2.2 percent a month earlier, with four industries slipping into contraction.

Steel and cement industries had posted robust gains. Steel output jumped 12.8 percent, its fastest pace in 21 months, while cement grew 11.7 percent, a four-month high.

Among the use-based industries, all six industries rose in July even as primary goods sector remained in contraction. In a good sign for consumption industry, consumer durables rose to a seven month high of 7.7 percent in July, while non-durables production rose to an eight month high of 0.5 percent.

"The growth in consumer non-durables is particularly notable, marking the first positive print after five consecutive months of contraction. However, while rural consumption has been holding up well, urban consumption continues to lag, signalling uneven recovery," said Rajani Sinha, chief economist, CareEdge.

Construction goods industry rose to 11.9 percent recording its first double digit performance since December, given the capex push from general government.

"The construction goods sector was the leading driver with a strong growth of 11.9 percent yoy, at a 21-month high in the same period due to a sustained progress in government capex. The capital goods sector also improved to 5 percent yoy in July 2025 from an eight-month low of 3 percent yoy in the previous month indicating some pickup in investment activity," said Paras Jasrai, associate director, India Ratings and Research.

Export-oriented manufacturers face fresh uncertainty as US President Donald Trump’s 50 percent tariff on Indian goods takes effect from August 27, threatening to weigh on production momentum in the second half of FY26.

"The power demand has bounced back in August 2025 with the power generation growing at 4.2 percent yoy (as of 27 August 2025), highest since March 2025 (6.4 percent yoy). With a favourable base effect across various segments, Ind-Ra expects August 2025 output growth to be in the range of 5-6 percent," Jasrai noted.