IIP vs PMI: Which Better Tracks India's Manufacturing?

What the IIP Measures and How?

The IIP tracks the growth rates of three key sectors, namely mining, manufacturing, and electricity, on a MoM basis. It is produced by the Ministry of Statistics and Programme Implementation and is based on actual production data collected from factories, mines, and power plants across the country. The data covers both large and small units.

Manufacturing, which carries the highest weight in the index at 76.06%, is the principal driver of the overall number. When manufacturing does well, the headline IIP tends to follow.

One structural limitation of the IIP is that it is a backward-looking measure. It tells you what already happened in a factory over a specific month. Revisions are also common, which means the first print you see is often not the final number.

What the PMI Measures and How?

The headline PMI figure is a weighted average of five sub-indices: new orders carry 30% weight, output 25%, employment 20%, supplier delivery times 15%, and stocks of purchases 10%.

The critical difference from the IIP is that PMI is a survey-based measure that focuses on large manufacturing units, while IIP data covers all units, both big and small. A reading above 50 signals expansion; below 50 signals contraction. The PMI is released on the first working day of the following month, making it one of the earliest available signals for where the sector stood in the prior month.

Because it is based on the intentions and perceptions of purchasing managers rather than recorded output, the PMI has a forward-looking character that the IIP does not. When a purchasing manager reports rising new orders, it is likely that production will follow in the coming weeks.

Where the Two Diverge?

The gap between these two indicators becomes visible when you look at recent data. India's final HSBC Manufacturing PMI for May 2026 came in at 55.0, above the April reading of 54.7, marking the strongest improvement in the health of the sector in three months. New orders and output both expanded at the fastest pace since February.

At the same time, the IIP recorded growth of 4.9% in April 2026 compared with April 2025, led by manufacturing sector growth of 6.2%. Both numbers are pointing in the same broad direction here, but that is not always the case. After months of fast-paced growth in manufacturing activity, the IIP has historically dipped even while PMI held steady for a fairly long period. The larger industries tend to react much later, which is why PMI started to fall only after the IIP had already been declining for some time.

The reason for this lag is fairly straightforward. The IIP picks up what is happening across all units, including the smaller ones that do not show up in the PMI survey. When a tightening cycle or an input cost shock hits MSMEs harder than larger firms, the IIP will reflect that pressure before the PMI does.

Recent Data: An Overview of Both

In May 2026, the Iran war's imprint on input costs was clearly visible in the PMI data. Purchasing prices rose at the second-fastest pace since April 2022, with panel members signalling greater outlays on energy, fuel, materials, and transportation.

On the IIP side, the growth of capital goods at 16% in April 2026 was pointed to by industry bodies as an indicator of enhanced investment and strong aggregate demand. High growth of intermediate goods at 7.7% and infrastructure and construction goods at 7.1% was seen as supportive of economic activity going forward.

The two indicators are, in this case, broadly aligned. Both suggest manufacturing is expanding, though the PMI flags rising cost pressures that the IIP figure alone would not convey.

Which One Should Be Used?

There is no clean answer to this. Each indicator answers a slightly different question.

The PMI data has not always been a successful lead indicator on IIP. The volatility of IIP data makes direct comparison between the two quite difficult. A three-month moving average of both series gives a more reliable picture than any single month's reading.

If you are trying to get a real-time read on business conditions and forward order flows, the PMI is more useful because it comes earlier and captures sentiment alongside output. If you want a harder count of what actually left factory gates across the entire economy, including small and medium units, the IIP is the more comprehensive measure.

In practice, watching both together gives you a fuller picture than either one alone. When the two are aligned, conviction on the manufacturing outlook is higher. When they diverge, it usually points to something worth digging into.