New Delhi: India’s industrial output grew by just 1.2% in May 2025, the slowest pace recorded in nine months, signaling a noticeable deceleration in the country’s economic momentum. The data, released by the National Statistical Office (NSO) on Monday, comes amid rising concerns that external factors, including erratic weather patterns and global headwinds, may be dampening the nation's recovery trajectory.
This figure marks a sharp slowdown compared to the 2.7% growth seen in April and is significantly below the 2.4% growth forecasted by economists. The last time industrial output recorded such sluggish expansion was in August 2024.
The Index of Industrial Production (IIP) data revealed uneven growth across various segments. The manufacturing sector, which holds a weight of nearly 78% in the IIP, expanded by 2.6% in May. Although it remained in positive territory, this was a marginal decline from April’s 3.1% growth, reflecting subdued consumer demand and tepid factory activity.
The mining sector, in contrast, contracted by 0.1%, affected by the early arrival of the southwest monsoon, which typically disrupts extraction activities. Even more concerning was the 5.8% drop in electricity generation, compared to a 1.7% rise in April. This decline signals both weaker industrial usage and potential volatility in power supply.
A key drag on the numbers came from the consumer goods segment. Consumer durables (such as home appliances and electronics) registered a 0.7% decline, while consumer non-durables (fast-moving consumer goods like packaged food and toiletries) shrank 2.4%, reflecting stress in both urban and rural demand.
Economists say this slump in consumer segments is worrying, as it suggests households are continuing to hold back on discretionary spending, a key engine for broader economic recovery.
Despite the broader slowdown, the capital goods sector an indicator of investment in infrastructure and machinery continued to show strength. It recorded a 14.1% year-on-year jump, almost on par with the 14.7% surge seen in April. This indicates that public and private sector investment plans may still be on track, offering a silver lining.
The industrial output data adds to a growing list of signals that India's economic growth in the April–June quarter may underperform expectations. A recent report by the Reserve Bank of India (RBI) had already warned of moderation in demand and cautioned that inflationary pressures could resurface, especially if monsoon patterns become erratic.
Manufacturing growth, in particular, is being watched closely following weaker-than-expected PMI (Purchasing Managers' Index) numbers for May, which pointed to softening factory orders and muted output growth.
With both consumer and power sectors displaying weakness, analysts expect the government and the RBI to remain cautious in their approach to fiscal and monetary policy. While the central bank is unlikely to cut interest rates in the near term due to persistent inflation concerns, it may step up liquidity support if the slowdown deepens.
In summary, May’s industrial output data underscores a fragile recovery, with key segments like consumer goods underperforming. While investment momentum and manufacturing activity provide some buffer, the overall picture suggests that India’s economy is entering a phase of cautious optimism, with policymakers needing to strike a careful balance between stimulating growth and managing inflation.