Context:
Industrial production in February 2025 slowed to 2.9%, marking a six-month low. This decline came as a result of a high base effect and lackluster demand. In February 2024, industrial production had grown by 5.6%, boosted by the leap year, while January 2025 saw a growth of 5.2%.
Key Sector Performance
- Mining: Growth in mining output slowed to 1.6%.
- Manufacturing: Manufacturing growth decelerated to 2.9%.
- Electricity Generation: Electricity output grew at a relatively quicker pace, registering a 3.6% increase in February.
Use-Based Classification Breakdown
- Capital Goods: Showed strong growth at 8.3%, indicating robust demand.
- Infrastructure Goods: Growth was also healthy at 6.6%.
- Primary Goods: Growth decelerated to 2.8%.
- Intermediate Goods: Growth slowed further to 1.5%.
Consumer Goods Performance
- Consumer Durables: Output rose by 3.8%.
- Consumer Non-Durables: Continued to decline, contracting by 2.1% for the third consecutive month.
Rural vs. Urban Demand
- Rural demand continues to improve, supported by robust agricultural production and expectations of a normal monsoon. The easing of food inflation is also helping consumption recovery.
- However, urban demand remains a concern, with weaker demand from urban sectors despite improvements in rural areas.
Economic Outlook and Concerns
- Economists are wary of a potential growth slowdown in FY 2025-26, particularly due to ongoing global uncertainties like the tariff war.
- Moody’s Analytics revised its India GDP growth forecast for 2025 downward to 6.1%, anticipating negative impacts on industries like gems & jewellery, medical devices, and textiles due to the ongoing tariff threats from the US.
- Despite these challenges, economists believe that the RBI’s rate cut and easing inflationary pressures will provide some support to industrial growth.
