“On balance, IIP growth may sustain in single digits in coming months,” the report said.
It added, “While upcoming festive demand to add positively to IIP, we see some downside risks from weak monsoon and impact of delayed pass-through of input costs on demand.”
“Also, supply shocks emanating from global uncertainties to have downward pressure on India’s manufacturing output. On balance, IIP growth may sustain in single digits in coming months.”
The outlook comes after India’s Index of Industrial Production (IIP) grew 8 per cent year-on-year in August 2026, up from 7.4 per cent in July. However, the report noted that part of the strong year-on-year growth was supported by a favourable base.
“Growth in manufacturing sector (y/y) was the key driving factor for IIP number in Aug’26, though switching to negative sequential momentum. Nevertheless, low base effect held up the y/y growth numbers,” the report said.
Manufacturing grew 9 per cent in August, compared with 8.2 per cent in July, while mining contracted 5.6 per cent, marking the sharpest slowdown in the sector in 17 months, according to the report.The report also pointed to signs of a gradual recovery in demand, particularly in rural consumption.
Consumer non-durables returned to positive growth at 2.1 per cent in August after contracting in the previous month, which Union Bank Research said was “signalling uptick in rural demand.”
“Overall demand conditions are seen to gradually revive as consumer durables demand stayed positive in Aug’26, while demand for non-durables too turned positive reflecting uptick in overall demand sentiments,” it said.
Capital goods production grew 16.9 per cent in August, while consumer durables rose 11.1 per cent, indicating continued strength in investment-related and discretionary demand.
Union Bank Research said high-frequency indicators also suggested that overall economic activity remained resilient in August, supported by GST collections, e-way bills, electricity demand, digital payments and stronger retail two-wheeler sales.
The report concluded saying the balance between festive demand support and risks from monsoon conditions, input costs and global supply disruptions would determine the pace of industrial growth in the coming months.