Industrial output growth dips to 2.9% in February from 5% in January

The industrial production, as measured by the Index of Industrial Production (IIP), fell to 2.9% in February 2025 from 5% in January, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday. 

For February 2025, the growth rates of the mining, manufacturing, and electricity sectors were reported at 1.6%, 2.9%, and 3.6%, respectively.

The lowest growth rate in recent times was observed in August of the previous year, with a flat growth rate of zero percent.

Recent data released in March indicated a decline in growth for the core sector or infrastructure industries, dropping to 2.9% in February from 5.1% in the previous month, marking the lowest growth rate in five months.

In the upcoming fiscal year FY25, it is anticipated that the manufacturing sector, the key contributor to India's industrial output, will experience a growth rate of 4.3 percent. This is a significant decrease from its previous growth rate of 12.3 percent in the last fiscal year.

This decline in performance can be attributed to the slowdown in government capital expenditure, which only achieved 80 percent of the annual target in the eleven months of the fiscal year.

"As expected, the leap year base pulled down the YoY growth of the IIP to 2.9% in February 2025 from 5.2% in January 2025, largely in line with ICRA’s forecast for the month (+3.0%). The deceleration was broad-based, with all the use-based categories, as well as two of the three sectors barring electricity, witnessing a slower growth in February 2025 vis-à-vis the previous month," said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd.

She added: "Following the base effect induced slowdown in February 2025, the YoY performance of most of the available high frequency indicators improved in March 2025, including electricity generation and the mobility and transport-related indicators, such as GST e-way bill generation, port cargo traffic, diesel consumption, petrol consumption, and vehicle registrations. While steel consumption declined in March 2025, this was dampened by a high base. 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. ICRA expects the IIP growth to print at ~3.0% in March 2025, similar to the levels seen in February 2025."

"The IIP growth came in at 2.9% YoY in Feb 2025, with a noticeable deceleration from 5.2% in Jan. This is mainly due to a material slowing in mining and manufacturing and is partly made worse by the base effect. The manufacturing sector, which holds the lion’s share of the IIP weight, expanded by 2.9%, its lowest level since last August,  showing subdued rural and semi-urban consumption trends. From a use-based perspective, capital goods posted an impressive 8.2% growth, hinting at a gradual revival in investment activity, while infrastructure and construction goods maintained a strong 6.6% growth, largely aided by government-led capex. That said, consumer non-durables registered a contraction for the third consecutive month due to persistent demand-side fragility, especially in staples," Sankar Chakraborti, MD & CEO, Acuité Ratings & Research Limited.