R. Suryamurthy
India’s industrial engine appears to be sputtering, with official data released today revealing a disappointing 2.7% growth in industrial production for April 2025. This stark slowdown from the 5.2% growth witnessed in April 2024 underscores a pervasive weakness across the vital manufacturing, mining, and power sectors, raising significant concerns about the robustness of the nation’s economic recovery.
The latest figures from the National Statistics Office (NSO), measuring the Index of Industrial Production (IIP), paint a worrying picture for the start of the new fiscal year. While the NSO did offer a slight upward revision for March’s growth to 3.9% (from 3%), the April performance aligns with the similarly sluggish 2.7% seen in February, suggesting a sustained period of subdued industrial activity rather than a one-off blip.
The detailed breakdown of sectoral performance exposes deep-seated vulnerabilities.
Manufacturing, the backbone of India’s industrial output, saw its growth decelerate to 3.4% in April 2025, a noticeable dip from 4.2% in the year-ago period. While this sector nominally “supported” overall IIP, its slowing momentum is a critical concern for job creation and economic diversification.
Mining production took a significant hit, contracting by 0.2%. This alarming reversal from a healthy 6.8% growth last year signals a foundational weakness that will inevitably impact downstream industries.
The power sector, crucial for powering industrial activity, also witnessed a sharp deceleration, with output growth plummeting to a mere 1% in April 2025, down from a robust 10.2% a year earlier. This indicates either faltering demand from industries or structural issues in power generation and supply.
Uneven Recovery and Persistent Weaknesses
An analysis of the use-based classification further reveals the uneven and precarious nature of India’s industrial landscape. The seemingly impressive surge in capital goods growth to 20.3% in April 2025 from 2.8% a year ago, while lauded by some economists, must be viewed with caution. As noted by analysts, this significant increase benefits from a supportive base effect (meaning the comparison is against a lower figure from the previous year) rather than necessarily indicating a sustained, widespread surge in private sector investment. The Centre’s capex contraction of 4% during Jan-Feb FY25, following a Q3 pickup, further raises questions about the consistency of investment momentum.
Consumer durables showed a moderate growth of 6.4%, but this is significantly lower than the 10.5% growth seen in April 2024. This moderation, despite some positive drivers like the rabi crop and wedding season, suggests underlying demand fragility.
Consumer non-durables remain mired in a contractionary phase, declining by 1.7% in April 2025 for the third consecutive month. This persistent negative growth underscores the severe unevenness in demand recovery, with rural demand particularly struggling. The “rural-urban divide” in consumption remains a glaring problem.
Infrastructure/construction goods also saw a deceleration, growing by 4% compared to an 8.5% expansion last year. This moderation, even with government spending initiatives, highlights a potential cooling in construction activity.
Primary goods contracted by 0.4%, a stark reversal from 7% growth previously, indicating a foundational weakness in raw material production.
Economists Point to Deep-Seated Issues
The consensus among leading economists, while acknowledging some positive sub-segments, largely points to a fragile and potentially volatile industrial outlook. Rajani Sinha, Chief Economist, CARE Ratings Ltd, while noting the headline growth was “higher than expected,” immediately shifted focus to critical concerns: “On the consumption front, while the output of consumer durable goods logged an encouraging growth, performance in consumer non-durables continued to disappoint, staying in the negative territory for the third month in a row. Going ahead, the domestic consumption landscape remains a key monitorable due to the prevailing unevenness in demand recovery.” She explicitly calls for a “durable urban demand recovery,” suggesting that current trends are unsustainable.
Sankar Chakraborti, MD & CEO, Acuité Ratings & Research Limited, while cautiously optimistic about manufacturing’s role, starkly highlights that “recovery remains uneven, with contractions in pharmaceuticals (-3.9%) and chemicals (-3.6%), likely reflecting global uncertainties.” This exposes a vulnerability to external headwinds that could derail broader industrial growth.
Madan Sabnavis, Chief Economist, Bank of Baroda, despite some positive remarks on capital goods and consumer durables, conceded that the “FMCG segment continued to register negative growth…Clearly the rural-urban divide persisted in terms of demand for these products.” This acknowledgment of persistent consumer weakness is critical.
Aditi Nayar, Chief Economist and Head of Research & Outreach at ICRA Limited, offered a more critical assessment, noting that “the subdued performance of the manufacturing output growth in April 2025 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.” This direct accusation of inflated export figures to mask underlying weakness is a severe indictment of the reported data.
D K Pant, Chief Economist of India Ratings and Research, provided the most unvarnished critique, unequivocally stating: “Electricity and Mining Pull Down Factory Output Growth to an Eight-Month Low in April 2025.” He further warns that “Industrial Output Growth in May 2025 Expected to be under 2% yoy,” citing factors like a significant fall in daily power generation and unseasonal rains impacting construction. Pant’s analysis of the “skewness in the industrial growth,” where only a minority of sub-sectors exhibit strong growth, demonstrates a lack of broad-based recovery.
The prevailing sentiment among economists is one of cautious pessimism. While some see potential for support from easing inflation and possible RBI rate cuts, significant headwinds remain. Global economic uncertainty, trade tensions, and the persistent unevenness in domestic demand – particularly the rural-urban consumption disparity – pose formidable challenges. The “weak momentum” in government capex and the fragility of private investment further complicate the outlook.
The April IIP figures, rather than indicating a robust start to the fiscal year, instead highlight a deeply complex and fragile industrial landscape. The reliance on favourable base effects for capital goods and the persistent contraction in consumer non-durables signal that a broad-based and sustainable recovery remains elusive, demanding intensified policy intervention and a realistic assessment of the true state of India’s industrial health.