India's Industrial Growth at 8-Month Low of 2.7% in April; Risks to Consumption, Investment

India's growth in industrial activity slowed to an eight-month low of 2.7% year-on-year in April 2025 from the upwardly revised 3.9% in March. The Index of Industrial Production (IIP) was dragged down by lower activity in several sectors, including mining and quarrying, electricity, primary goods, infrastructure and construction, and consumer non-durables.

According to data released by the Ministry of Statistics and Programme Implementation, the IIP stood at 152.0 in April 2025, up from 148.0 in April 2024. Among the sectors, manufacturing, which carries the largest weight in the index, grew 3.4%, up from 3.0% in March. Electricity generation increased by 1.1%, while mining output contracted by 0.2%, the worst since August last year.

Notably, the capital goods sector saw strong growth of 20.3% in April 2025, albeit on a low base of 2.81% in April last year. The consumer durables segment saw growth quickening to 6.4%, a three-month high. On the other hand, consumer non-durables output contracted 1.7% compared to a decline of 2.5% a year ago.

Infrastructure/construction goods reported a growth of 4% in April 2025, down from an 8.5% expansion in the year-ago period. The data also showed that the output of primary goods contracted by 0.4% in April 2025 against 7% growth a year earlier. The expansion in the intermediate goods segment was 4.1 per cent in the month under review, up from 3.8 per cent a year ago.

"The slowdown, albeit mild, was broad-based driven by a weaker performance across all three production sectors. However, the performance of the use-based sectors was mixed, with three of the six witnessing an improvement, including capital goods, intermediate goods, and consumer non-durables," said Aditi Nayar chief economist at ICRA.

She noted that the subdued performance of the manufacturing output growth in April stood at odds with the double-digit expansion in non-oil exports in the month, suggesting that the latter may have been partly driven by round-tripping.

Nomura highlighted that recent data revisions indicate average industrial output growth in Q1 2025 has edged up to 4.0% year-on-year, from a previously estimated 3.6%, remaining broadly flat compared to Q4 2024. This could pose an upside risk to the Q1 GDP figures, which are due to be released this Friday.

“We anticipate a moderation in private consumption, fixed investment, and export growth,” Nomura added, “but a sharper contraction in imports is likely to result in a positive net export contribution to overall GDP growth.”