Industrial output growth slumped to a 10-month low of 1.5% in June as mining and electricity sectors contracted sharply, causing the Index of Industrial Production (IIP) to rise at an 11-quarter low rate of 2% in April-June quarter.
The IIP had risen 1.9% in May and 4.9% in June of 2024. Within the IIP only manufacturing was in the growth zone in June, expanding at 3.9%, slightly more than the revised figure of 3.2% in June, according to the data released by the National Statistical Office (NSO). The mining sector saw a contraction of 8.7% and electricity 2.6% in June.
Manufacturing cushions slump
IIP growth was 4% in the fourth quarter of FY25 and 5.4% in the first quarter of FY25. Excess rains in parts of the country during the April-June quarter dampened the electricity generation and mining output.
“The growth in manufacturing volumes slowed somewhat between April-June and January-March. Given this, and the slower, albeit healthy, growth in construction-related volume indicators such cement output and finished steel consumption, ICRA expects the industrial GVA growth to decelerate in Q1 FY2026 from the 6.5% uptick seen in Q4 FY2025,” chief economist at ICRA Aditi Nayar said..
Within the IIP the manufacturing sector has a weight of 77.6%. Within manufacturing chemical sector output contracted (-3.9%), rubber and plastics (-0.5), computer and electronics (-1.3%), beverages (-6.5%) and and leather sector (-3.1%)
Support to the manufacturing sector came from expansion of output of basic metals (9.6%) , petroleum products (4.2%), fabricated metal products excluding machinery (15.2%), textiles (1.2%) and apparel (4.2%) provided support.
Within the manufacturing sector, 15 out of 23 industry groups have recorded a positive growth in June 2025 over June 2024, NSO said.
Capex momentum falters
As per the use based classification, in June the capital goods sector growth slumped to 3.5% from 13.3% in May. Intermediate goods growth was 5.5% in June up from 4.9% in May.
Infrastructure and construction goods saw an increase in growth to 7.2% in June from 6.7% in May.
“On the investment front while private capex is yet to show meaningful traction, public capex continues to remain encouraging. However, persistent global uncertainties are weighing on the overall investment sentiment,” chief economist at CareEdge Ratings Rajani Sinha said.
Consumer durable sector’s growth was 2.9% in June as against 0.9% contraction in May. Consumer non-durable remained in the negative zone with a contraction of 0.4% in June, performing slightly better than the -1.0% decline in May. Primary goods output decline deepened to – 3.0% from -1.4% in May.
“On the demand side, signals remain mixed. Urban consumption, in particular, remains lagging. Nonetheless, consistent easing of inflation, a favourable monsoon, and recent policy rate cuts by the RBI are positives for the consumption scenario going forward. Against this backdrop, both demand and investment trends will need to be watched closely in the coming months,” Sinha added.