Electricity production jumps, pulls up May industrial growth to 5-month high of 5.1%
India's Index of Industrial Production (IIP) grew 5.1% year-on-year in May 2026, the highest reading in five months, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI).
The Quick Estimate of the IIP stood at 122.7 in May 2026, compared with 116.7 in May 2025.
Manufacturing output — the largest component of IIP — expanded 5.5% year-on-year, driving overall growth alongside the electricity sector.
Electricity and Gas Supply recorded a particularly strong 9.9% year-on-year growth, reflecting elevated summer demand and growing renewable generation.
Mining and Quarrying contracted by 1.6% during the month, acting as a partial drag on the headline figure.
MoSPI simultaneously announced a significant methodological change: the ministry will adopt the Output Producer Price Index (Output PPI) as the deflator for the new IIP series with base year 2022-23, replacing the Wholesale Price Index (WPI) previously used — a step toward internationally aligned measurement standards.
Index of Industrial Production (IIP) — Structure and Methodology
The Index of Industrial Production is a composite indicator that measures the quantum of growth in industrial production across the Indian economy over a specified reference period. It is compiled and released monthly by MoSPI.
Key Details
- Base year: 2011-12 = 100 (current series; the announced 2022-23 base year will replace this when the new series is released).
- Three broad sectors and their weights (base year 2011-12): Manufacturing — 77.63%; Mining — 14.37%; Electricity — 7.99%.
- Use-based classification (six categories): Primary Goods, Capital Goods, Intermediate Goods, Infrastructure/Construction Goods, Consumer Durables, and Consumer Non-Durables — enabling analysis of the demand-side drivers of industrial activity.
- Data is released with a six-week lag (May IIP released in late June); the first release is a Quick Estimate, subject to revision.
- IIP is a key input into GDP estimates (Gross Value Added of the industry sector) and is closely monitored by the Reserve Bank of India for monetary policy formulation.
The 5.1% headline for May 2026 is composed of a strong 5.5% in manufacturing and 9.9% in electricity, partially offset by a -1.6% contraction in mining — a pattern that highlights sector-specific dynamics rather than broad-based industrial recovery.
Eight Core Industries Index — The IIP's Leading Indicator
The Index of Eight Core Industries (ICI) covers the eight infrastructure-heavy industries that are the most closely watched sub-components of IIP. It is compiled by the Office of Economic Adviser (OEA) under the Department for Promotion of Industry and Internal Trade (DPIIT), and released ahead of the full IIP print.
Key Details
- The eight core industries are: Coal, Crude Oil, Natural Gas, Refinery Products, Fertilisers, Steel, Cement, and Electricity.
- Combined weight of the Eight Core Industries in IIP: 40.27%.
- Individual weights within the core index (base year 2011-12): Petroleum Refinery Products (28.04%), Electricity (19.85%), Steel (17.92%), Coal (10.33%), Crude Oil (8.98%), Natural Gas (6.88%), Cement (5.37%), Fertilisers (2.63%).
- Because the core index accounts for over 40% of IIP and is released earlier, it serves as a useful advance signal for the full IIP print.
Electricity's strong 9.9% growth in May 2026 aligns directly with electricity's 19.85% weight in the core index, making it a significant contributor to both the Core Industries Index and the overall IIP.
IIP as an Economic Indicator — Significance and Limitations
IIP is one of India's most closely tracked high-frequency economic indicators, serving as a monthly barometer of industrial health in the absence of more frequent GDP data.
Key Details
- Published monthly (with ~6-week lag) by MoSPI; base year 2011-12 (revision to 2022-23 announced and in progress).
- IIP data feeds into the National Accounts Statistics (NAS) for estimating the industrial sector's contribution to GDP — specifically the GVA at Basic Prices for the industry sector.
- Limitations: IIP covers only the organised manufacturing sector; it excludes services (which account for ~55% of GDP), the informal/unorganised sector, and agriculture. Base-year lag can cause distortions as the economy's structure changes.
- The RBI uses IIP alongside CPI, WPI, PMI, and credit growth data in its monetary policy assessments; strong IIP prints reduce the case for rate cuts by signalling economic momentum.
- The methodological shift to Output PPI as deflator (announced alongside the May 2026 data) is significant: Output PPI better captures price changes at the producer stage than WPI, reducing measurement distortion and aligning India's methodology with international best practices.
The May 2026 IIP at 5.1% represents a recovery from subdued earlier months; electricity-led growth reflects seasonal summer demand and energy transition momentum, while mining's contraction signals continued supply-side challenges in extractive industries.
- IIP growth: 5.1% year-on-year in May 2026 (5-month high); Quick Estimate index value: 122.7 (vs. 116.7 in May 2025).
- Sector-wise: Manufacturing +5.5% YoY; Electricity +9.9% YoY; Mining -1.6% YoY.
- IIP base year: 2011-12 = 100; new series base year 2022-23 announced (will use Output PPI as deflator, replacing WPI).
- Sectoral weights (2011-12 base): Manufacturing 77.63%, Mining 14.37%, Electricity 7.99%.
- Eight Core Industries: weight in IIP = 40.27%; compiled by OEA/DPIIT; components — Coal, Crude Oil, Natural Gas, Refinery Products, Fertilisers, Steel, Cement, Electricity.
- Electricity weight in Eight Core Industries index: 19.85% (second highest after Petroleum Refinery Products at 28.04%).
- IIP released by: MoSPI (Ministry of Statistics and Programme Implementation), Government of India.
- Use-based categories: Primary Goods, Capital Goods, Intermediate Goods, Infrastructure/Construction Goods, Consumer Durables, Consumer Non-Durables.
- IIP lag: approximately 6 weeks after the reference month; subject to subsequent revision.