India Revamps the Index of Industrial Production (IIP); Output Grows 5.1% in May 2026

India has overhauled its Index of Industrial Production (IIP), the main monthly measure of factory, mining and electricity output. On 1 June 2026 the government launched a new IIP series with 2022-23 as the base year, replacing the older, out-of-date basket. Days later it issued another important update to the way growth is calculated.

The key change is the deflator, the tool used to strip out the effect of inflation so that real output changes can be measured. The revised IIP now uses a newly built Producer Price Index (PPI) instead of the older Wholesale Price Index (WPI). This gives a better picture for items whose output is reported by value, which make up about 36% of the index's weight. Because the IIP is also used as an input for GDP estimation, the change improves national accounts data too.

On the numbers, industrial output grew 5.1% in May 2026 over a year earlier, a five-month high, up from 4.9% in April. Manufacturing grew 5.5% in May. Every segment except mining and quarrying performed well, and consumer durables and non-durables touched multi-month highs.

However, analysts raised concerns about what is driving the growth. One view credits a revival in domestic consumption; the opposite view argues that domestic demand is actually weak and that rising exports are pulling up production. This is supported by slower growth in GST revenue from domestic transactions and by merchandise exports hitting an all-time high in May. If growth depends on exports, the economy becomes more exposed to global events.

Experts also questioned why the Ministry of Statistics and Programme Implementation (MoSPI) switched to the PPI deflator belatedly rather than when the new series began on 1 June. For exams, this topic links data methodology, deflators, GDP estimation and the role of MoSPI.