February sees slower IIP growth, tariff risks lurk ahead

Industrial growth as measured by the Index of Industrial Production (IIP) slowed to 2.9% in February from 5.2% in January (revised up from 5.0%), driven by lower output growth in the mining and manufacturing sectors, while electricity recorded an uptick.

US tariff hikes is a key risk to Crisil’s GDP growth forecast for fiscal 2026. Slower global growth, along with anticipated reciprocal tariffs on India after three months, is likely to hit exports. Uncertainty about the duration and frequent changes in tariffs could hinder investments. We, however, expect the RBI’s monetary easing to create some offset to the external headwinds. Interest rate cuts, income tax relief and easing inflation are expected to provide tailwinds to consumption this fiscal, while the expected normal monsoon will support agricultural incomes. Moreover, the anticipated decline in global crude oil prices, resulting from a potential global slowdown, is expected to provide additional support to domestic growth. Net-net, Crisil expects growth of 6.5% in fiscal 2026, with risks tilted to the downside.