Title: Industrial Production Growth Slows to 2.9% in February 2025 Amid Weak Manufacturing and Consumer Demand

Content:

India's industrial production growth decelerated sharply to a six-month low of 2.9% in February 2025, signaling a significant slowdown in factory output and raising concerns over the momentum of economic expansion. This slowdown is attributed primarily to subdued performance in the manufacturing, mining, and power sectors, coupled with weak consumer demand and a high base effect from the previous year. The latest official data from the National Statistics Office (NSO) and Ministry of Statistics and Programme Implementation (MoSPI) highlight challenges to sustaining industrial growth as key sectors lose steam.

Overview of Industrial Production Trends

The Index of Industrial Production (IIP), which measures factory output across mining, manufacturing, and electricity sectors, rose by just 2.9% in February 2025 compared to the previous year. This marks a sharp deceleration from the 5.6% increase recorded in February 2024 and also falls below the revised January 2025 growth of 5.2%[2][3][4].

• Manufacturing output growth slowed considerably to 2.9% in February 2025, down from 4.9% a year ago.
• Mining production growth dipped to 1.6% from 8.1% in February 2024.
• Power generation growth slowed to 3.6% compared to 7.6% in the same month last year[2][3][4].

In the cumulative April 2024 to February 2025 period, industrial growth averaged 4.1%, a notable decline from 6% recorded during the corresponding period the year before, indicating a broader deceleration in factory activity[2][4].

Key Factors Behind the Slowdown

Manufacturing Sector Weakness

The manufacturing sector, which accounts for a large portion of India's industrial output, is experiencing faltering growth due to multiple internal and external headwinds:

• Lackluster consumer demand is dampening production and inventory replenishment.
• Rising input costs and global uncertainties are restraining private investments.
• Specific sub-sectors like basic metals, motor vehicles, and non-metallic mineral products remain bright spots but cannot offset the overall drag[3][4].

Mining and Electricity Sector Performance

The mining sector's growth declined sharply, affected by decreased commodity demand and production constraints. Electricity generation, while still growing, slowed relative to previous performance, partly due to moderated industrial and commercial consumption[2][3][4].

High Base Effect

February 2024 witnessed a strong IIP growth of 5.6%, partly due to a leap year effect, setting a high benchmark that is difficult to surpass, thus contributing to the apparent slowdown in year-on-year comparisons[2][4].

Weak Consumer Demand and Urban Consumption

Analysts note ongoing challenges in urban demand, which continues to lag behind improving rural consumption. Factors such as inflation, global trade tensions, and cautious private sector spending are limiting consumer spending recovery in cities[4].

Sectoral Insights and Growth Drivers

Despite the overall slowdown, certain categories within industrial production showed resilience:

• Capital goods production grew robustly at 8.3%, indicating ongoing investments in machinery and equipment.
• Infrastructure goods expanded by 6.6%, supporting sectors linked to construction and development projects.
• Consumer durables output increased by 3.8%, although consumer non-durables declined by 2.1%, remaining in negative territory for the third consecutive month[4].

Economic Implications and Forecasts

The industrial growth slowdown has raised caution among economists and rating agencies. Acuité Ratings has warned of a plateauing momentum in industrial growth due to persistent macroeconomic uncertainties and subdued demand[1].

• Moody's Analytics revised India’s GDP growth forecast downward by 30 basis points to 6.1% for calendar year 2025, citing external risks such as the ongoing tariff war affecting export sectors like gems, textiles, and medical devices.
• Private investment is expected to remain tepid, though public capital expenditure could provide some offset to industrial demand weakness.
• The Reserve Bank of India’s recent rate cuts and easing inflation may lend some support to revival in industrial activity in the coming months[4].

Economists from Icra and Care Ratings expect the industrial production growth for March 2025 to remain around 3%, similar to February’s subdued levels, as electricity and manufacturing sectors show modest improvements[4].

Conclusion: Navigating the Industrial Growth Challenge

India’s industrial growth deceleration to 2.9% in February 2025 underscores the complex challenges facing the manufacturing, mining, and power sectors. Weak consumer demand, global uncertainties, and the high base effect combine to slow factory output momentum at a critical juncture for the economy.

While pockets of robust growth in capital goods and infrastructure segments offer some optimism, sustained revival will depend on strengthening urban consumption, stabilizing global trade conditions, and boosting private investment. Policymakers and industry stakeholders will need to maintain a close watch on emerging trends and leverage fiscal and monetary tools to stimulate production and consumption in the months ahead.

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This article integrates the latest statistics and expert insights to provide a comprehensive overview of India’s industrial production slowdown in February 2025, supporting readers and industry watchers with current, actionable information.