India's Industrial Production Slumps to Six-Month Low of 2.9% in February 2025

India's Industrial Production Decelerates to Six-Month Low of 2.9% in February

India's industrial output growth slowed significantly in February 2025, falling to a six-month low of 2.9 percent from 5.2 percent in January, according to official data released on April 11. This deceleration mirrors the weakening performance of the core infrastructure sector, which constitutes 40 percent of the Index of Industrial Production (IIP).

Broad-Based Slowdown Across Sectors

The slowdown was widespread, affecting most major industrial categories and sectors. According to experts, the leap year base effect contributed significantly to the year-on-year decline in growth metrics.

"As expected, the leap year base pulled down the YoY growth of the IIP to 2.9 percent in February 2025 from 5.2 percent in January 2025," noted Aditi Nayar, Chief Economist at ICRA. She added that the deceleration was broad-based, with all use-based categories and two of the three main sectors (except electricity) experiencing slower growth rates compared to the previous month.

Data published in March had already indicated that growth in the core infrastructure industries had declined to a five-month low of 2.9 percent in February, down from 5.1 percent in January.

Sectoral Performance Analysis

Breaking down the three major industrial sectors:

• Electricity was the only sector to show improvement, growing at 3.6 percent compared to 2.4 percent in January
• Manufacturing, the largest component of India's industrial index, slowed significantly to 2.9 percent from 5.8 percent
• Mining growth fell to a four-month low of 1.6 percent, down sharply from 4.4 percent in the previous month

Use-Based Industry Trends

The use-based classification of industries revealed concerning trends across all six sectors:

• Consumer non-durables continued their contractionary trend, declining by 1.8 percent compared to a 0.3 percent contraction in January
• Consumer durables growth slowed significantly to 3.9 percent from 7.2 percent
• Capital goods, despite the slowdown, maintained relatively robust growth at 9 percent, only slightly below the 10.3 percent recorded in January
• Infrastructure/construction goods saw growth decline to 6.4 percent from 7.4 percent
• Primary goods growth was cut in half, falling to 2.8 percent from 5.5 percent in the previous month

Fiscal Year Performance and Outlook

For the eleven-month period of April 2024 to February 2025, industrial growth stood at 4.1 percent, notably lower than the 6 percent registered during the same period in the previous fiscal year.

The manufacturing sector, which constitutes the largest component of India's industrial index, is projected to grow at 4.3 percent in FY25, significantly lower than the robust 12.3 percent growth recorded in the previous fiscal year.

The performance also reflects the sluggish pace of government capital expenditure, which had reached only 80 percent of the full-year target in the eleven months of the fiscal year.

March Expectations

Looking ahead to March data, economists do not anticipate significant improvement. "While the growth performance of mining is expected to deteriorate in March 2025 relative to February 2025, this is likely to be offset by an uptick in electricity generation, amid steady manufacturing growth," Nayar forecasted. ICRA expects IIP growth to remain at approximately 3.0 percent in March 2025, similar to February levels.

The consistent deceleration in industrial production, particularly in consumer goods categories, may raise concerns about domestic demand conditions and could influence monetary policy considerations in the coming quarters.

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Categories: IIP growth slowdown, India industrial production data, manufacturing sector performance