Festive demand and state spending seen propping up India's industry in second half of FY27

what happened

According to a Union Bank of India report published by Moody's, festive-season demand and steady government capital spending are likely to lift India's industrial activity in the second half of fiscal 2027. Yet adverse base effects, a weak monsoon and costlier raw materials could hold back output.

Industrial production growth slowed to 6.7% in September from 7.8% in August, but averaged 6.8% in the first half of FY27, up from 4.4% a year earlier. Infrastructure and construction output rose 7.2% and capital goods production 10.4%, though both grew more slowly than in August.

Consumer durables growth fell to 6% from 10.5% in August, while non-durables returned to growth at 1.4%. Two-wheeler sales jumped 33.4% year on year and passenger vehicle sales 23.3%, and petroleum consumption rose 3.4% after five months of decline. The bank warned that higher input costs from global supply shocks may take time to pass through to prices.

why it matters

For markets, the signal is moderately positive for Indian industrial and consumer companies, since strong festive demand and infrastructure spending support revenue. However, a delayed pass-through of expensive inputs could squeeze margins, so the pace of activity in the second half will be closely watched by investors.

market impact

Indian equities: festive demand and public capex support industrial and consumer sectors

• ▲Indian industrial stocks pressure up — festive demand and public capex support company revenue

tags

instruments