Aaj Ki Janta

India’s industrial activity hit a speed bump in February 2025, as the Index of Industrial Production (IIP) registered a muted growth of 2.9%, marking its slowest pace in six months, according to data released by the Ministry of Statistics and Programme Implementation. The figure came in well below the 4% growth forecasted by Reuters, raising concerns about the strength of the country’s industrial recovery.

All Major Sectors Lose Steam

The slowdown was driven by weaker performances across mining, manufacturing, and electricity—India’s three core industrial sectors.

• Mining output expanded by just 1.6%, a steep decline from 8.1% in February 2024.
• Manufacturing, which contributes over 75% to the IIP, grew 2.9%, down from 4.9% last year.
• Electricity generation rose 3.6%, less than half of the 7.6% seen a year earlier.

“The combination of a high base effect and broad-based sectoral cooling has weighed on industrial performance,” said Paras Jasrai, Associate Director at India Ratings and Research.

Use-Based Breakdown: Capital Goods Shine Amid Weakness Elsewhere

Among use-based categories, capital goods emerged as a bright spot, recording an impressive 8.2% growth, compared to just 1.7% last year. However, other segments showed a worrying decline:

• Intermediate goods grew a mere 1.5%.
• Consumer non-durables fell 2.1%, though this was a slight improvement from a 3.2% drop in February 2024.
• All sub-sectors experienced a month-on-month decline, ending a five-month streak of rising output.

“This points to a muted and volatile industrial growth trend,” Jasrai added.

Barclays: Power Demand Softened the Blow

According to Aastha Gudwani, Chief India Economist at Barclays, “The deceleration in IIP was driven largely by manufacturing, though higher power demand helped cushion the slowdown to an extent.” She noted that capital and infrastructure goods remain strong, indicating some resilience in investment-driven demand.

Looking ahead, Gudwani expects IIP growth to rebound in March, fueled by inventory build-up ahead of U.S. tariff actions.

As India navigates a complex global and domestic economic landscape, February’s sluggish IIP figures underline the fragile nature of the industrial recovery, calling for close monitoring and potential policy support.