Industrial output expanded at the slowest pace in six months at 2.9% on year in February, as growth in manufacturing and mining faltered, according to data released by the government on Friday.
The growth in Index of Industrial Production (IIP) in February was sharply lower than the revised figure of 5.2% in January. The manufacturing sector expanded just 2.9% in February from 5.8% in January and 4.9% in February of last year. The sector accounts for 77.6% of the index. The mining sector also experienced a significant decline.
The drag to the manufacturing during the month came from the chemicals, coke and petroleum refinery sectors where output contracted while basic metals, transport equipment saw growth slowing. The headline number was also impacted by the relatively high base of 5.6% which in part was due to additional leap-year day in the year-ago month.
The drop confirms the indications of India’s Manufacturing Purchasing Managers Index which in February was at a 14-month low of 56.3. Despite the lows the PMI was firmly within expansionary territory. Robust global demand continued to boost growth in the Indian manufacturing sector in February , which increased its purchasing activity and employment, as per the PMI report.
According to Crisil, the IIP data corroborates the slowdown, even as it show manufacturing performed better on average in the second half of 2024-25. This lifted growth in segments such as petroleum products, machinery and textiles,” the agency added. It noted the latest RBI Quarterly Industrial Outlook survey shows firms seeing an improvement in demand conditions in the fourth quarter compared with the previous one.
As for use-based categories, all sectors in February grew slower both when compared to the January this year and February of last year barring consumer non-durables where the pace of contraction narrowed. Consumer durable output growth fell to a 15-month low of 3.8% year-on-year in February. The consumer non-durables output declined 2.1% in February, third straight month of contraction for the sector.
However, growth of 8.2% year-on-year in capital goods and 6.6% in infrastructure goods during February relatively strong investment demand. The uptick in government spending on infrastructure has been holding up these two sectors for the past few months.
“This suggests sustained-but-moderated growth in investment demand and construction sector output,” senior analyst at India Ratings and Research Paras Jasrai said .
The signs of manufacturing slowdown are visible in intermediate goods where growth has been 1.5% as against 8.6% in the February of last year.
“Overall, it appears that consumption demand has slowed down in February 2025. However, there is light at the tunnel with the substantial easing of food inflation in the recent time period and monetary easing in February and April 2025, the effect of which would be felt with a lag in FY26,” Jasrai said.
“Going ahead, global uncertainty continues to cast a shadow on both private investment and consumption. However, RBI’s second rate cut and expected moderation in inflationary pressures will provide some support,” chief economist at Care Ratings Rajani Sinha said.